Resilient U.S. crude oil exports, growing European share

To label the rise in U.S. crude oil exports relentless is an understatement. This rate of growth shows no signs of abating. Overseas crude oil shipments have jumped from an average of 494,000 bpd in 2015 to over 4 mbpd this year. It would be easy to explain this explosion by the emergence of the U.S. shale industry, but it is only one side of the story. Quality issues play an equally important part. Shale crude is predominantly light and sweet, but domestic refiners are configured to process heavier grades. The rise in exports has been coupled with steady gross imports averaging between 6 and 7 mbpd annually in the last five years.

U.S. crude oil export destinations used to be the function of pure market forces. This status quo was upended by the invasion of Ukraine. Simply put, the realignment of oil flows got under way. As Russian export barrels were backed out by traditional trading partners such as Europe, they have been replaced by U.S. crude oil. At the same time Russian oil finds home, at depressed prices, in countries that do not adhere to western sanctions. The most important of which are China and India. This change in trend is what is on display in the chart above. In 2021 23% of the total U.S. crude oil exports went to China & India. This figure dropped to 14% in the March-December 2022 period. Conversely, shipments to Europe, which made up 31% of the total in 2021 have risen to 37% during the same period in 2022. The rising share of Europe of U.S. crude exports is especially conspicuous in the middle of last year.

Although Asian imports of U.S. cargoes jumped suddenly in March this year, the increase is expected to be a one-off as local refiners built up stocks ahead of maintenance. Chinese and Indian imports of Russian crude have been on the ascent again in April and May. Consequently, the gap between the two lines in the chart is expected to diverge once again in coming months–especially after the introduction of WTI Midland into the Brent basket from this month–which will inevitably increase the number of U.S. cargoes arriving at European ports going forward.

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