vlcc supertanker

U.S. Crude Oil Exports Add to Global Glut

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June 4, 2015

BW Utik, a 299k dwt VLCC built in 2001, image courtesy BW Group

 Lynn Doan (Bloomberg) For a nation that bans most oil exports, the U.S. still finds a way to ship more abroad than at least two OPEC members.

The shale oil-rich nation exported more than half a million barrels a day in April, the most since at least 1920, and more than Libya or Ecuador shipped in the same month. OPEC ministers are meeting this week to decide a response to the global oversupply just as Iraq signals it will boost overseas deliveries and Iran urges the group to make room for more output if global sanctions against the Persian Gulf state ease.

The supplies threaten to exacerbate a global glut that sent prices to a six-year low as producers use horizontal drilling and hydraulic fracturing to pull oil out of U.S. shale formations. The country’s decades-old ban on exports has exemptions, including sales to Canada and shipments of ultra-light crude known as condensate as well as some Alaskan and California heavy crude.

“U.S. oil is looking attractive compared to other imports,” Richard Mallinson, an analyst at consulting company Energy Aspects Ltd. said by phone from London on Wednesday. “You still have a pretty good discount for U.S. crude relative to imported barrels.”

West Texas Intermediate was unchanged at $59.64 a barrel in electronic trading on the New York Mercantile Exchange at 12:58 p.m. Singapore time. The U.S. benchmark crude’s discount to Brent, the global marker, narrowed 6 cents to $4.10.

The Organization of Petroleum Exporting Countries, which has pumped above its output quota for 12 months, is determined to subdue supply from higher-cost producers. All but one of 34 analysts surveyed by Bloomberg last month predicted the 12-nation group will maintain the current daily limit of 30 million barrels.

OPEC Quota

The U.S. has barred most exports of unrefined crude since 1975, following the Arab oil embargo. Among the exemptions are also re-exports of Canadian crude, while condensate can be sold overseas so long as the oil is lightly processed.

The majority of the 586,379 barrels a day exported in April from the U.S. went to Canada, which brought in a record 492,237 barrels a day, according to Census Bureau data released Wednesday. The Netherlands took its first shipment of 1.12 million barrels from the U.S.

Asia imported 1.19 million barrels for the month. ConocoPhillips sent its second tanker of Alaskan oil to Asia that month because it received higher bids there than it did on the U.S. West Coast, company spokeswoman Andrea Urbanek said at the time.

China imported 213,705 barrels from the San Francisco area, the Census Bureau data show. A batch of California oil that had been contaminated with chlorides in 2012 was loaded that month for export to Asia, according to ship-fixture data and the California Energy Commission.

Spain took in 522,831 barrels from the Houston-Galveston area in Texas.

Libya, OPEC’s smallest producer, exported 346,667 barrels a day in April, according to ship-tracking data compiled by Bloomberg. Ecuador, the group’s second-smallest supplier, shipped about 336,500 barrels a day that month, according to the country’s central bank.

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