Crude oil and product prices are putting in what should be a major seasonal bottom as global oil demand surges and the U.S. Petroleum Industry looks to fill the globe’s needs. In fact, the U.S. petroleum industry is doing their part to try to reduce the trade gap by exporting record amounts of oil and products. The U.S. shale revolution is touching the world in ways thought unimaginable by many just a few years ago.
Yesterday by the Energy Information Administration (EIA) reported that U.S. crude oil exports grew to an average of 1.1 million barrels per day (b/d) in 2017, the second full year since restrictions on crude oil exports were removed. Crude oil exports in 2017 were nearly double the level of exports in 2016. Increased U.S. crude oil exports were supported by increasing U.S. crude oil production and expanded infrastructure.
The EIA also reported that U.S. crude oil exports went to 37 destinations in 2017, compared with 27 destinations in 2016. Like previous years, Canada remained the largest destination for U.S. crude oil exports, but Canada’s share of total U.S. crude oil exports continued to decrease, down from 61% in 2016 to 29% in 2017. U.S. crude oil exports to China accounted for 202,000 b/d (20%) of the 527,000 b/d total increase. China surpassed the United Kingdom and the Netherlands to become the second-largest destination for U.S. crude oil exports in 2017.
The EIA said that many European nations are among the largest destinations for U.S. crude oil exports, including the United Kingdom, Netherlands, Italy, France and Spain. India, which did not receive U.S. crude oil exports in 2016, received 22,000 b/d in 2017, tying with Spain as the 10th largest destination.
Yet, while the world may covet shale light crude, there is a much tighter market for heavier grades. With U.S. oil and global demand ready to take off, we should see oil gasoline and distillate start to take off as well. Recent whipsaw trading, based on stock market and political fears, should taper off as the market has to come to grips with the fact that based on strong demand versus current and expected supply, we will see the tightest market in years.
That should bode very well for the seasonal "up move" as refiners start to emerge from maintenance. Hedgers get hedged as the seasonal trend should be very strong and you don’t want to be unhedged like many were last winter. Even with surging shale production, global oil inventories are trending lower and that is going to accelerate in the next few months.
Natural gas may be signaling that spring may be near! Or maybe it is because Saint Patrick’s Day is right around the corner. Despite the cold weather, the EIA was a wee bit bearish. The EIA reported that natural gas fell by 93 billion cubic feet for the week ended March 9. Analysts surveyed by S&P Global Platts had forecast a decrease of 100 billion, while the five-year average withdrawal is 97 billion.
Total stocks now stand at 1.532 trillion cubic feet, down 718 billion cubic feet from a year ago, and 296 billion below the five-year average according to MarketWatch. Yet, despite being below average on supply production is way above average. The EIA reported that dry gas production was 78.4 bcf up dramatically from last year’s 71.3 bcf.
WTI oil has held near $60 per barrel and RBOB looks like it broke above resistance. Heating o il also is looking like it will run,if the seasonal pattern holds.