US crude shippers have their targets set on Europe, where refiners are still trying to phase out Russian oil supply and were forced to supplement tighter supplies from elsewhere with alternatives from the Americas.
Welcome back to Argus’ monthly blog: The US Crude Export Chronicles, by deputy crude editor Amanda Hilow (@HilowMidpoint). Come back every month for a recap on US crude exports and how they are faring under volatile global conditions.
Uncertainty surrounding crude supply to Europe pushed waterborne US crude prices higher, though arbitrage conditions were volatile as freight rates out of the US Gulf coast moved to their highest since January 2020 at around $6/bl for Aframax-sized WTI cargoes destined for Europe.
Light sweet US crude cargoes were initially supported by Libyan force majeures, uncertainty surrounding exports from Russia’s CPC terminal and an ongoing drive in Europe to replace Russian oil supply amid the conflict in Ukraine. But spot prices made a downward correction in the final leg of the month after Libyan state-owned NOC said it would resume crude exports from four terminals by 21 July, ending weeks of blockades that have nearly halved the country's oil production.
WTI fob Houston still averaged a $3.27/bl premium to the international benchmark Ice Brent during the August US trade month, which concluded 25 July, reflecting a 30¢/bl month-on-month increase compared to the July trade month.
European demand pushed exports to a year-to-date high in May, according to the latest available monthly statistics by the US Census Bureau. Total exports rose by 6pc from April to 3.4mn b/d, reflecting a 22pc increase compared to May 2021.
The UK surpassed the Netherlands as the top destination for US crude, increasing its take by more than 80,000 b/d, or 22pc, from April to 460,000 b/d. Flows to the Netherlands fell by roughly 30,000 b/d, or 7.7pc, to just under 350,000 b/d. Shipments to each country rose year on year by roughly 63pc and 45pc, respectively.
Italy and France also posted large increases. US crude exports to Italy rose by 45pc on the month to almost 200,000 b/d in May, up by 5.7pc from May 2021, while exports to France rose by more than 50pc from April to about 190,000 b/d — nearly triple May 2021 flows.
Total US crude flows to Europe rose by 3.6pc on the month to 1.65mn b/d, up by more than 70pc year-on-year to comprise 47.9pc of total exports in May. Volume shipped to Asia-Pacific destinations comprised just 38.9pc of exports in May, while combined exports to Canada, Latin America and the Caribbean represented 12.7pc of total shipments.
Opec+ delegates will meet this week to discuss future output policies from September forward, after recently unwinding the last of nearly 10mn b/d in forced production curtailments that were imposed in May 2020.
Some countries are calling for additional supply to help combat high energy prices worldwide, with benchmarks still circling the $100/bl mark, but there has been little success thus far in obtaining a concrete commitment from Mideast Gulf producers to boost output.
Any decision could have knock-on impacts to US crude exports, which could either be displaced by increasing global supplies, or could draw further price support by acting as an alternative to both Mideast Gulf crude and Russian oil supplies.
Argus is watching, as always, how markets will play out amid ongoing geopolitical tensions and a pending recovery from the worst of the Covid-19 pandemic. Come back again next month for an update on the role of US crude exports in volatile global markets. Until then, smooth sailing.
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