Since the U.S. lifted a 40-year ban on crude oil exports in 2016, American oil producers have entered the market in a major way. Analysts predict that crude oil exports in 2018 will continue to reach new heights, due to a variety of causes.
Export Growth Is the New Normal
In January of 2018, Reuters published an article quoting industry experts who expected the number of oil exports to reach 1.5 million barrels per day (bpd) by summer. For comparison, exports were below one million bpd at the start of Q4 2017.
Amazingly, it appears that these projections may have understated the record-breaking summer export surge that’s expected. According to Rob Thummel, managing director at Tortoise, an energy investment and management firm, this number will likely surpass 2 million bpd throughout the summer as worldwide petroleum demand surges, as reported in a Bloomberg News article.
Why the Sudden Increase?
There are a variety of reasons why the U.S. is steadily becoming the world’s largest oil producer and exporter, ranging from the domestic supply in accordance with foreign demand, fewer restrictions on exports, and broadening of ventures into new markets. Here are a few of the key drivers:
A Domestic Oil Supply that Surpasses Demand
Within the U.S., a boom in oil production due to infrastructure investments in the Permian Basin and ongoing developments of the shale oil fracturing industry has led to an increased difference in WTI vs Brent crude oil, with Brent priced higher than WTI. With WTI crude priced lower than Brent, WTI remains competitive on the world market despite the higher shipping costs.
A Continuation of Trends
When the U.S. removed restrictions on petroleum exports, it did more than just change the domestic market for oil — it shook up the long-held control that OPEC had over the market. OPEC’s production limits kept prices steady at a level that allowed the U.S. to undercut it upon entry to the market. The result? Many countries are choosing to import from the United States over the alternatives.
According to the U.S. Energy Information Administration (EIA), the U.S. will surpass the market share of OPEC in the next five years due to the increased use of fracking technology and new investment in large domestic reserves. The trends are already developing: Between 2016 and 2017 U.S. oil exports nearly doubled, reaching 1.1 million bpd from one year to the next. If the expected happens and that number reaches as high as 2 million bpd throughout this summer, this would provide even further incentive from China and other countries to purchase U.S. oil, who had previously imported oil from OPEC member countries primarily.
A Look Further into the Future
According to the International Energy Agency, the U.S. is forecasted to be the driving force behind helping fill the need of the world’s growing demand for oil over the next five years. According to IEA Director, Fatih Birol, the U.S. should be prepared to export 5 million barrels a day by the year 2023. Therefore, expect oil exports to break records this summer and potentially every year for the foreseeable future.