US becomes a major oil supplier to Europe

  • 10 Dec 2019
  • By Paul Wightman

US crude oil exports have risen sharply since Congress voted to lift the export ban. In January 2016, in the immediate period following the lifting of the crude oil export ban exports of US crude oil were just 490,000 barrels per day with all volumes destined for Canadian refineries. In the first eight months of 2019, total exports surged to average around 2.8 million bpd, a five-fold percentage increase in three years, based on data from the US Energy Information Administration (EIA).

The unprecedented growth in US exports of crude oil has made the country one of key suppliers to the global energy market. These changes have also increased WTI’s influence on global benchmark pricing1.

While US crude has now been shipped to dozens of destinations around the world, a substantial share of exports finds its way to Europe. According to the BP Statistical Review of World Energy 2019 report2, Europe imported around 29.2 million tonnes of US crude in 2018 compared to 10.8 million tonnes in 2017. This represented around 6% of total European crude supply. Based on the latest 2019 data, it is expected that these volumes could be surpassed.

Among the European nations, France, Italy, Netherlands and the United Kingdom are the most significant in terms of volume. In September 2019, US exports surpassed   North Sea loaded volumes for the key crude oil grades Brent, Forties, Oseberg, Ekofisk and Troll (BFOET). These grades are key constituents of the Dated Brent benchmark.

Chart 1: US exports of crude oil by region

Source: US EIA data

European imports of US crude oil exceed North Sea loaded volume

Oil supply availability for European oil refiners has changed substantially due to higher volumes of US grades being sold in the region, in some cases for the first time. Significantly, the volumes of US crude being exported to Europe have surpassed the volumes loaded for the key BFOET crude oils. These changes have introduced an increase of WTI-linked pricing to a region that has historically bought crudes linked to Dated Brent.

Chart 2: European imports of US crude surpass BFOET loaded volumes

Source: Bloomberg and US EIA data

In January 2016, total exports of US crude to Europe were just 43,000 barrels per day. However, by September 2019, US exports had reached 907,000 barrels per day. Bloomberg data shows that total volumes of crude loaded for BFOET grades was 860,000 barrels per day in September 2019. Twelve months earlier, total US exports to Europe were 580,000 barrels per day with BFOET (loaded volumes) around 1 million barrels per day.

There are four European countries that have emerged as significant buyers of US crude oil. In the first eight months of 2019, US crude oil exports to France, Italy, the Netherlands and the United Kingdom were 637,000 barrels per day, an increase of 144% from 2018. US exports reached just shy of 1 million barrels per day in January 2019. In late 2018 Argus Media had stated that US crude oil imports into Europe could reach 900,000 barrels per day, by the end of 2019 and would surpass the combined BFOET production3. The latest EIA data indicates that this level could be within reach on a sustainable basis.

Chart 3: European imports of US crude by country

Source: US EIA data

In late 2018, to capture the growing influence of non-North Sea grades in Brent, Argus Media began assessing their own dated Brent price to sit alongside their existing Brent assessment. The assessment referred to as “new dated Brent” is using delivered grades of other light, sweet crude grades, such as WTI4 as well as Mediterranean and Caspian crudes.

WTI crude is the largest US crude oil sold into Europe

WTI was the largest US grade exported to the UK, Netherlands and Italy in 2018 according to data from Kpler. Their analysis shows that, of total US crude import volumes, WTI accounted for 38% of total US imports into Europe followed by Midland and Eagle Ford.

Chart 4

Source: US Kpler data

Conclusion: US importance grows

The role of the US in the global crude oil market has increased, driven in part by higher volumes of exports. European markets have been a major importer of key US grades and volumes have risen to levels that have started to rival the production of the key grades that underpin the European crude oil benchmark Dated Brent. These changes position the US to challenge for a greater share of WTI-linked pricing outside North America.


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