U.S. Shale Surge Offsets Lowest Saudi Oil Imports Since 1980s

Global Stock Markets

 America’s role in the global oil market was flipped on its head in 2017. As shale producers cranked out more and more crude, the U.S. relied less and less on some of its traditional sources of oil. 

At the same time, exports of crude, gasoline and other refined fuels surged higher than ever before.

The U.S. bypassed Saudi Arabia late last year and is nipping on the heels of Russia to be the world’s biggest oil producer.

November output hit a record of 10.057 million barrels a day after the Energy Information Administration revised its data upward. U.S. frackers ramped up production as prices rose toward $60 a barrel late in the year, drawing more drillers to the market.

Two of the most-watched members of the Organization of Petroleum Exporting Countries sent less crude to the U.S. -- one by choice, and one not so much.

Saudi deliveries fell as planned production cuts were implemented to help balance the market and support prices. Venezuela’s hit came amid U.S.-imposed financial sanctions and shrinking production. Meanwhile, imports from Iraq jumped to help keep OPEC steady.

Last year, exports of crude, gasoline and distillates all rose to record highs, and combined shipments abroad finished off the year at 7.3 million barrels a day in December, the largest volume ever in EIA data.

The export machine will likely keep running at full steam in 2018. Demand for refined products may continue to strengthen from Latin America as local refineries struggle to stay in good keep.

Gulf Coast crude exports have more potential, too, now that the Louisiana Offshore Oil Port can load supertankers.

Oil markets roiled as Harvey hits U.S. petroleum industry

Oil markets were roiled on Monday after Tropical Storm Harvey wreaked havoc along the U.S. Gulf Coast over the weekend, crippling Houston and its port, and knocking out several refineries as well as some crude production.

U.S. gasoline prices hit two-year highs as massive floods caused by the storm forced refineries in the area to close. In turn, U.S. crude futures fell as the refinery shutdowns could reduce demand for American crude.

Brent futures LCOc1 gained as pipeline blockades in Libya slashed the OPEC state’s output by nearly 400,000 barrels per day.

Harvey is the most powerful hurricane to hit Texas in more than 50 years, killing at least two people, causing large-scale flooding, and forcing the closure of Houston port as well as several refineries.

The U.S. National Hurricane Center said Harvey was moving away from the coast but was expected to linger close to the shore through Tuesday. It said floods would spread from Texas eastward to Louisiana.

Texas is home to 5.6 million barrels per day (bpd) of refining capacity, and Louisiana has 3.3 million bpd. Over 2 million bpd of refining capacity was estimated to be offline as a result of the storm.

Spot prices for U.S. gasoline futures RBc1 surged 7 percent to a peak of $1.7799 per gallon, the highest level since late July 2015, before easing to $1.7529 by 1130 GMT.

U.S. traders were seeking oil product cargoes from North Asia, several refining and shipping sources told Reuters, with transatlantic exports of motor fuel out of Europe expected to surge.

About 22 percent, or 379,000 bpd, of Gulf production was idled due to the storm as of Sunday afternoon, the U.S. Bureau of Safety and Environmental Enforcement said.

There might also be around 300,000 bpd of onshore U.S. production shut in, trading sources said.

Brent crude futures LCOc1 were up 20 cents at $52.61 per barrel. U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 44 cents at $47.43 a barrel. 

The price moves pushed the WTI discount versus Brent to as much as $5.21 per barrel, the widest in two years.