Asia Remains Key Destination for US Crude Exports

  • 2 Mar 2021
  • By Cameron Liao
  • Topics: Energy

US exports volume remained strong despite the impact on oil demand from the COVID-19 global pandemic.  In the first 11 months of 2020, US crude oil exports averaged close to 3,100 thousand barrels per day. This was a 7% year-over-year increase, according to the data published by the Energy Information Administration (EIA).

The world’s largest crude oil producer has increased exports exponentially since the lifting of export ban in 2016. In the past five years, US exports grew from less than 500,000 barrels per day to more than three million barrels per day in 2020, making the US one of the largest crude oil exporters to the global market.

A substantial amount of US crude is consumed by the largest economies in Asia including Korea, China, India, Japan, Singapore, Taiwan, and Thailand. In the past five years, US crude oil shipped to Asia has grown significantly from nearly zero to reach about 45% of total exports. Among the Asian nations, South Korea, China, and India are the main importers of US crude oil.

Chart 1. US Exports of Crude Oil into Asia-Pacific

Source: EIA

South Korea

South Korea began importing crude from the US on a regular basis in 2016 and had gradually increased its volume since then. In 2018 and 2019, South Korea was the largest consumer of US crude in the region, importing about 400,000 barrels per day.

In 2020, South Korea’s imports of US crude slowed down due to lower fuel consumption and weaker demand for light sweet crude oil. However, the country still imported significant amounts of US crude1, US crude exports to Korea averaged around 260,000 barrels per day ‒ which put South Korea in second place behind China.

Chart 2. US Crude Exports to South Korea

Source: EIA

China

China’s imports of US crude have been sporadic, mainly due to the China-US political tensions. As a result, imports tend to vary from month to month. In 2017, the market was observing a growth in US crude oil being exported to China. The volume was later curbed by the trade friction with the US that began in 2018.

In 2020, there was a turnaround in the trend as China’s imports of US crude surged. The increased volume is on the back of the China-US phase-one trade deal and a low crude oil price environment as global benchmark WTI Crude Oil futures were trading below $30 per barrel for most of Q2 2020. China was also one of the first economies to rebound from the pandemic. According to data by EIA, China’s crude oil imports from the US reached a new record high of 1.26 million barrels per day in May. In the first 11 months of 2020, China crude imports from the US averaged close to 460,000 barrels per day, overtaking South Korea as the largest US crude importer in the APAC region.

Chart 3. US Crude Exports to China

Source: EIA

India

In addition to China and South Korea, India is another major buyer of US crude. India traditionally relies on producers in the Middle East for its crude supply. It started importing from the US in 2017 with an aim to diversify its crude purchases. The volume was modest in 2017 with an average of 26,000 barrels per day but ramped up quickly over the next couple of years to average 150,000 barrels per day in 2018 and 250,000 barrels per day in 2019.

As was the case in South Korea, Indian demand for US crudes in 2020 was also impacted by the COVID-19 pandemic. However, imports from the US recovered strongly in Q4 with a new volume record of 430,000 barrels per day in November. With that averaged in, US crude exports to India reached about 250,000 barrels per day between January and November 2020, on par with the 2019 level.

Chart 4. US Crude Exports to India

Source: EIA

In the first 11 months of 2020, South Korea, China, and India had imported about 970,000 barrels per day of crude oil from the US ‒ an increase of 150,000 barrels per day from same period 12 months earlier. The three countries together accounted for about two-thirds of the US crude exports to Asia. Following these three countries, the largest US crude consumers are Taiwan and Singapore. Taiwan averaged about 170,000 barrels per day of US crude imports, and Singapore averaged about 110,000 barrels per day.

Risk management

Global energy supply and demand has been greatly impacted by the pandemic. While US crude oil production is expected to be lower than its peak in 2019, its exports remain an important supply source to Asian markets. With almost half of US crude exports arriving in Asia, the need for managing US-based, WTI-linked crude oil price risk is also on the rise from within the region2. This provides an opportunity for local market participants to further adopt US benchmark referencing. In fact, as US crude exports continue to be shipped to Asia, the liquidity in CME WTI Crude Oil futures during Asian hours has also been growing. Before the lifting of the export ban, Asian hours3 volume represented slightly less than 10% of total business. That share has more than doubled and averaged about 21% in 2020. The increased volume in Asian hours is a result of rising interest from the time zone, and it in turn enables firms in the region to manage price risks more efficiently.

CME WTI Futures Average Daily Volume (ADV) During Asian Hours as % of Total Market

References

  1. Based on January to November 2020 US crude oil exports by destination data by EIA 
  2. https://www.cmegroup.com/education/articles-and-reports/surging-us-crude-exports-increase-wtis-global-pricing-influence.html In the Exchange’s publication we discussed the impact of U.S. crude exports and the growing pricing relevance of WTI.
  3. Defined as Singapore 8 a.m. to 8 p.m.
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