The US shale oil industry has been credited for the pressure exerted towards OPEC oil producers, in terms of market share and its resilience, despite the low oil price environment of the past couple of years. With oil prices rising once more, few are betting against shale this time around. For the tanker market in particular, the US shale oil industry’s boom hasn’t had the negative impact of the past, as the rise in oil production hasn’t dented the country’s oil imports, while at the same time, there’s been a notable boom of US oil exports.
In its latest weekly report, shipbroker Gibson said that “the US shale industry made a spectacular recovery last year, supported by firmer oil prices on the back of the robust growth in oil demand and output restraint exercised by OPEC and its partners. In December 2017, US crude production was assessed by the Energy Information Administration (EIA), the US energy watchdog, at just over 9.9 million b/d, up by a colossal 1.15 million b/d compared to December 2016”.
According to the London-based shipbroker, “in the past, such large-scale gains in domestic output triggered similar scale declines in the country’s crude imports but it does not appear to be the case this time around. In fact, US crude imports averaged slightly higher during the first three quarters of 2017 relative to the corresponding period of 2016. Interestingly, long haul crude shipments from the Middle East showed very little change year-on-year, trade from Canada continued to increase and a further decline was seen in short haul volumes shipped from Latin America, most notably Columbia and Venezuela. However, the picture changed in the fourth quarter. Preliminary weekly data provided by the EIA shows a sizable drop in the volume of crude imported between October and December 2017 compared to levels witnessed earlier in the year. Yet, this decline is partially attributable to disruptions caused by several major hurricanes in the US Gulf and the fact that refiners tend to reduce stocks at the end of the year in order to reduce tax liabilities. Nonetheless, even with less crude shipped towards the end of the year, annual average volumes in 2017 are likely to be very similar to those seen in 2016. Another key factor in the US crude trade last year is the relentless growth in the country’s crude exports. In the third quarter of 2017 exports averaged around 1.05 million b/d, up by nearly 0.45 million b/d year-on-year. Initial weekly estimates also suggest further growth in the fourth quarter, with exports averaging at record high levels at around 1.45 million b/d”.
There is more to come. Just a few days ago the EIA published its outlook for domestic crude production for the next two years. The latest forecast for 2018 is notably more bullish, which perhaps is not surprising taking into account the upward trend in oil prices in recent weeks, with Brent futures flirting with the $70/bbl mark and WTI rising close to $64/bbl. The agency now expects domestic crude production to reach record high levels in March, when output is forecast to climb above 10.1 million b/d. On an annual basis, production is projected to average over 10.25 million b/d in 2018, up by another 1 million b/d year-on-year. A further annual gain of around 0.55 million b/d is anticipated in 2019.
Such robust projections for output growth, coupled with the ongoing infrastructure improvements in the US to expand its export capacity suggest strong potential for further increases in exports. The same will also help to alleviate the downward pressure on imports. However, the future is far from certain. Perhaps the biggest uncertainty surrounds the OPEC response to a continued surge in US shale output.
Meanwhile, in the crude tanker market this past week, in the Middle East, Gibson said that “by any normal standards, volume wasn’t the issue for VLCC Owners – it was a busy period, but fat availability continued to weigh heavily, and rates became solidly boxed into a range capped at ws 50 to the East and ws 25 to the West, with marked discounts from that for older, and more challenged units. January needs are now all but covered, and February programmes will not be fully confirmed until late next week, so any potential momentum is likely to be lost. Suezmaxes posted no change to the previous rate structure – maximum ws 87.5 to the East and ws 37.5 to the West as tonnage lists continue to easily handle modest demand. Aframaxes had a sluggish week of it as maintenance schedules restricted demand and rates shuffled sideways at ws 92.5/95 to Singapore with little early change likely”.
Source: Hellenic Shipping News.