The increase in crude oil production in the United States, the expansion of crude oil pipelines and export capacity are important reasons behind the surge in U.S. crude oil exports last year.
The three key drivers that U.S. crude oil exports – increased production, increased export capacity, and Brent-WTI crude oil spread – appear to continue to maintain, leading to continued growth in export volume, which continues to lose Asian market share. The OPEC exporter is bad news.
2017 is the second full year after the US crude oil export ban was lifted in late 2015. US crude oil exports nearly doubled in 2017 compared to 2016, with an average of 1.1 million barrels per day.
The United States exported crude oil to 37 countries last year, a significant increase from 27 in 2016. Canada remains the largest export market for US crude oil, but its share has fallen from 61% in 2016 to 29%. The most significant increase in U.S. exports is China; Russia and Saudi Arabia have competed for the position of bosses in the Chinese crude oil market for many years, and Russia has gained the upper hand over the past two years.
The increase in U.S. crude oil exports to China accounted for 202,000 U.S. barrels per day or 20% of the total U.S. export volume of 527,000 barrels/day in 2017. In 2017, China surpassed the United Kingdom and the Netherlands as the second largest destination for US crude oil exports, second only to Canada.
Another major Asian crude oil importer, India, which did not purchase any US crude oil in 2016, imported 22,000 barrels/day of crude oil from the United States in 2017, and ranks with Spain as the tenth largest destination for US crude oil exports.
The increase in US crude oil exports is not just an increase in production. The Brent-WIT crude oil spread is an important stimulus. In 2017, Brent crude spot price averaged 3.36 US dollars/barrel higher than WTI price, while in 2016 this price difference was only 0.40 US dollars/barrel. This provides price incentives for the United States to export crude oil to the international market.
According to the US Energy Information Administration (EIA), if US exports are to continue rising this year, similar conditions must be met in terms of production, infrastructure, and Brent-WTI spreads. And these conditions are likely to be met in 2018.