The New American Revolution: US Crude Goes Global

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S&P Global Platts Analytics predicts US crude oil exports will hit nearly 4 million barrels/day in 2020.

Foreword by Joel Hanley

The growth in the United States’ tight oil in recent years has long drawn comparisons with the oil rush of John D. Rockefeller’s day: the nexus of advancing technology, high prices and strong demand has been seen before, and like the 19th Century oil boom, its impact will be felt for years to come.

The fact that the world’s largest oil consumer has more than doubled its own crude production to become the largest oil producer would be remarkable enough; the fact that it managed it in just seven-and-a-half years is truly historic. Since January 2011, the world has watched as the United States emerged from the financial crisis with nothing short of a petroleum revolution. Funded by $100+/barrel oil prices for much of 2011 to 2014, technological progress saw off the production share challenge of OPEC until the cartel was the first to blink in 2016, after calling in as many as 12 non-OPEC countries for help. That orchestrated cut has gradually increased prices two-fold and re-established OPEC’s relevance in the global oil markets.

But now it’s going global and long-established trade flows have drastically changed. Ten years ago, Nigeria used to send well over 1 million b/d to the US but now that light sweet crude has been all but completely displaced by home-produced American oil. It has had to look for new homes, with prices slashed as a result. Those who relied on the US to suck in barrels have increasingly had to look east and now find themselves competing with American oil, be it sweet onshore crude, or even the sourer Mars from offshore the US Gulf Coast.

International crude oil benchmarks have also seen an impact. The rise of crude exports from the US has reestablished West Texas Intermediate’s (WTI) credentials as a global benchmark, its relationship with the North Sea’s Dated Brent ever more relevant. However, traders are not just talking about Brent/Dubai or WTI/Brent spreads: given strong Chinese, Korean and Japanese demand, the interest in the WTI/Dubai spread appears irresistible.

As for Europe, the US is now sending over 500,000 b/d of crude, a number that will only rise in the near term. In response to growing European imports from the US, S&P Global Platts recently launched assessments for major light sweet grades Eagle Ford 45 and WTI Midland for delivery into major European refining hubs.

In this special report we assess the local and global impacts of the US’s crude exports, tracing their path from the Permian Basin and Bakken Formation, through the myriad tendrils of the country’s vast pipeline network, and out to the regional demand centers that now have a taste for American oil. We look at the changing trade flows, the complex quality matrix across US grades, and the possible impact of increasingly tough trade negotiations. That all of this is occurring against a fast-changing backdrop of sulfur regulation in the shipping industry only serves to make it even more interesting.

The story of US exports is a tale of democratized production, disrupted flows, and displaced crudes. The challenges and opportunities it presents are countless.

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