While the first large-scale exports of US crude oil in a generation have been, on balance, positive for US oil prices, there remains little prospect in the near term for the trend to significantly impact demand for US oil and thus bolster domestic oil prices and drilling to any substantial extent.
That’s the main takeaway from a talk we had with Matt Smith, director of commodity research at New York-based Clipperdata, a consultancy focused on waterborne trade of crude oil and refined products.
Noting a big jump in waterborne exports of US crude oil recently, Smith said, “We saw a large ramp in March, nearly doubling what we saw in February. In March, about 450,000 b/d was shipped out. We believe that was probably a blip and not a trend, however.”
He explained that increased exports of US crude have brought WTI and Brent close to parity in the rst quarter of this year.
Among the plays or regions now bene ting the most from US crude oil exports, Smith cites the Eagle Ford Shale, adding that the recent shipment of 175,000 bbl of Bakken crude to a Rotterdam refinery (the first such sale of Bakken crude outside the US) by Hess early this month was an “anomaly.”
Smith suggests that for US crude prices to increase in response to developments in international oil trade, it would likely involve “some geopolitical event that would incentivize Brent Crude prices to rise.”
But until then, the US crude export market is far from robust as yet.
“Interestingly, we saw imports of foreign crude into the Gulf Coast recently at the highest level they have been since August 2014,” Smith said. “That shows that the world is not ready for our crude yet. East Coast refineries and it cheaper to import crude from West Africa rather than buy it from the Bakken.”