GWPF Newsletter: U.S. To Become World’s Top Oil Exporter

Shale Revolution Puts U.S. In Driver’s Seat

In this newsletter:

1) U.S. To Become World’s Top Oil Exporter -- Citi
Tim Daiss, OilPrice, 2 May 2018  
 
2) Oil Prices Fall On Rising U.S. Crude Inventories, Record Production
Henning Gloystein, Reuters, 3 May 2018

 
3) Energy Firms Will Build U.S. Gateway for World’s Biggest Tankers
The Wall Street Journal, 2 May 2018
 
4) Trump's Revenge: U.S. Oil Floods Europe, Hurting OPEC And Russia
Reuters, 24 April 2018
 
5) Stephen Moore: Shale Revolution Puts U.S. In Driver’s Seat
Boston Herald. 2 May 2018
 
6) China Is Replacing Europe As Russia's No. 1 Oil Customer
Tsvetana Paraskova, OilPrice.com, 3 May 2018
 
7) Bucking Global Trends, Japan Again Embraces Coal Power
Science Magazine, 2 May 2018 
 
8) And Finally: Europe’s Latest Green Flop: CO2 Emissions Rising
Reuters, 4 May 2018

Full details:

1) U.S. To Become World’s Top Oil Exporter -- Citi
Tim Daiss, OilPrice, 2 May 2018  

As global oil markets shift their attention from U.S. shale oil production back to a resurgent Saudi Arabia and Russia and geopolitical concerns bearing down on oil prices, Citigroup said last Wednesday that the U.S. is poised to surpass Saudi Arabia next year as the world’s largest exporter of crude and oil products.

The U.S. exported a record 8.3 million barrels per day (bpd) last week of crude oil and petroleum products, the government also said Wednesday. Top crude oil exporter Saudi Arabia’s, for its part, exported 9.3 million bpd in January, while Russia exported 7.4 million bpd, the bank added.

However, it should also be noted that the Citi projection is for both crude and finished (refined) petroleum products, not only crude oil. Saudi Arabia remains the world’s largest exporter of crude, though since January amid the OPEC/non-OPEC production cut agreement that figure has fallen. On April 10, the Saudi oil minister said that the kingdom planned to keep its crude oil shipments in May below 7 million bpd for the 12th consecutive month.

Saudi Arabia has also trimmed its oil production more than 100 percent of the output cuts it agreed to under the January 2017 production deal. In March, Saudi crude production was at 9.91 million bpd, below the deal’s output target of 10.058 million bpd.

Russia, however, also part of the global oil protection cut agreement, increased its crude oil production by 0.2 percent to 10.97 million bpd in March, compared to the previous month and an 11-month high.

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2) Oil Prices Fall On Rising U.S. Crude Inventories, Record Production
Henning Gloystein, Reuters, 3 May 2018 

SINGAPORE, May 3 (Reuters) - Oil prices fell early on Thursday, pulled down by a rise in U.S. crude inventories and record weekly U.S. production, which is countering efforts by producer cartel OPEC to cut supplies and prop up prices.

U.S. West Texas Intermediate (WTI) crude futures were down 28 cents, or 0.4 percent, at $67.65 per barrel at 0004 GMT.

Brent crude oil futures were at $73.04 per barrel, down 32 cents, or 0.4 percent, from their last close.

Prices were pulled down by a report from the U.S. Energy Information Administration (EIA) on Wednesday showing U.S. crude inventories jumped by 6.2 million barrels to 435.96 million barrels C-STK-T-EIA in the week to April 27, marking a 2018 high.

“The (EIA) report showed a much larger than expected crude build for last week as well as an unexpected build in gasoline inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

U.S. oil production also hit a fresh record of 10.62 million barrels per day (bpd), a jump of more than a quarter since mid-2016.

The United States now produces more crude oil than top exporter and OPEC-kingpin Saudi Arabia.

Only Russia currently pumps more oil, at around 11 million bpd.

O’Loughlin said that relatively high oil prices, supported by healthy demand and production cuts by the Organization of the Petroleum Exporting Countries (OPEC) to tighten markets, “are encouraging U.S. shale producers to continue ramping up production.”

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3) Energy Firms Will Build U.S. Gateway for World’s Biggest Tankers
The Wall Street Journal, 2 May 2018 

New U.S. crude export facilities on the Gulf Coast may bring the world’s troubled business of operating big tankers a needed new market for transporting oil.

A trio of American energy logistics firms is preparing to build a terminal at the Port of Corpus Christi in Texas capable of handling very large crude carriers, or VLCCs, adding to a flurry of activity for U.S. oil exports that reached a record 2.3 million barrels a day last week.

Buckeye Partners,  Phillips 66 Partners and refiner Andeavor formed a joint venture to build the facility at the South Texas Gateway Terminal, a major transit point for U.S. energy exports heading to international markets.

Phillips 66 and Andeavor will be the launch customers for shipping crude out of the terminal, with two deep-water docks capable of berthing VLCCs, along with 3.4 million barrels of oil storage. The South Texas Gateway Terminal is scheduled to kick off operations next year.

The project will add capacity to a booming U.S. crude trade.

The U.S. Energy Information Administration says crude exports recently averaged around 1.6 million barrels a day over four weeks. Growing production of crude, refined products and liquefied natural gas could make the U.S. a net energy exporter by 2022, according to the EIA’s Annual Energy Outlook.

Tanker owners are hoping the growing U.S. exports will boost an international crude transport market that has remained in a slump this year.

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4) Trump's Revenge: U.S. Oil Floods Europe, Hurting OPEC And Russia
Reuters, 24 April 2018

MOSCOW/LONDON (Reuters) - As OPEC’s efforts to balance the oil market bear fruit, U.S. producers are reaping the benefits - and flooding Europe with a record amount of crude.

Russia paired with the Organization of the Petroleum Exporting Countries last year in cutting oil output jointly by 1.8 million barrels per day (bpd), a deal they say has largely rebalanced the market and one that has helped elevate benchmark Brent prices LCOc1 close to four-year highs.

Now, the relatively high prices brought about by that pact, coupled with surging U.S. output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, traders said.

“U.S. oil is on offer everywhere,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude and has recently started purchasing U.S. oil. “It puts local grades under a lot of pressure.”

U.S. oil output is expected to hit 10.7 million bpd this year, rivaling that of top producers Russia and Saudi Arabia.

In April, U.S. supplies to Europe are set to reach an all-time high of roughly 550,000 bpd (around 2.2 million tonnes), according to the Thomson Reuters Eikon trade flows monitor.

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5) Stephen Moore: Shale Revolution Puts U.S. In Driver’s Seat
Boston Herald. 2 May 2018

I have argued many times that the shale oil and gas revolution is the story of the decade. Since 2007, U.S. oil and gas output has risen by about 75 percent, and the renaissance is still in its infancy stages.

This year the surge in domestic energy production has further accelerated, in part due to higher world prices for oil (approaching $70 a barrel) and to massive drilling operations in rich oil patches, such as the Permian Basin in Texas and the Bakken shale in North Dakota.

The Energy Information Administration reports that the U.S. could surpass Saudi Arabia in oil and gas by the end of the year. With massive oil and gas shale reserves, we could be No. 1 in the world before the end of the decade.

The Wall Street Journal confirms that U.S. oil production “is expected this year to surpass Saudi Arabia’s” and that we will rival Russia for No. 1 in the world. American production will rise to almost 11 million barrels a day, the most ever in American history. Doesn’t it seem like yesterday when the left was running around shrieking about “peak oil”? More like peak idiocy.

Last week Reuters argued that the American shale boom should be called “Donald Trump’s Revenge.” The story reported that U.S. oil “now floods Europe at the expense of OPEC and Russia.” Couldn’t have happened to a couple of nicer guys. America is now selling more than a half-million barrels a day, thanks in no small part to the end of the oil and gas export ban in 2016.

What all of this means is that we are getting very close to the day when America returns to becoming a net exporter of oil. This would reduce our trade deficit by more than $200 billion a year. Saudi Arabia is still a major player in the market that can move the world price by turning on and off their spigots. The recent spike in gas prices to more than $3 a gallon is due to Russia and Saudi Arabia’s production cuts. But the OPEC nations can no longer hold the world hostage, as they did in the 1970s, when we had gasoline lines and price controls and had to bow to the Saudi oil sheiks. 

What a difference a president makes. Trump has been all in on encouraging fossil fuel production. He’s freeing up federal lands in places such as Alaska for drilling, allowing permits for new pipelines and relaxing some of the anti-fracking regulations that were enacted in the Obama years. As Harold Hamm, the CEO of Continental Energy, which owns much of the Bakken shale in North Dakota, recently told me: “It makes a big difference when you have a president who actually likes your industry.”

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6) China Is Replacing Europe As Russia's No. 1 Oil Customer
Tsvetana Paraskova, OilPrice.com, 3 May 2018

Since the start of 2018, Russia’s pipeline crude oil exports to China have been growing, while its seaborne shipments to Europe have been falling.

At the beginning of this year, Russia doubled the capacity of pipeline exports to China, where it has been the top oil supplier for more than a year after overtaking OPEC’s top exporter and de facto leader Saudi Arabia last year.

While Russia is trying to get a bigger chunk of the fast-growing Chinese oil market, it is doing so at the expense of its number-one oil customer, Europe. Decreased seaborne crude oil shipments to Europe may prompt European refiners to buy more Middle Eastern barrels and crude oil from the U.S., analysts say. In addition, lower Russian seaborne shipments could add to the woes of the tanker freight sector, which is also feeling the decline of OPEC’s exports due to the oil cuts pact and an oversupply of tankers.

According to loading programs obtained by Bloomberg, Russia’s crude oil exports from its western ports on the Black and Baltic Seas—most of which go to Europe—will have dropped by 19 percent to 1.86 million bpd between January and May 2018. At the same time, Russia’s exports via pipeline to China soared 43 percent to around 750,000 bpd in Q1 2018, data by pipeline operator Transneft shows.

As Russia is boosting crude oil supply to China at Europe’s expense, European refiners may look to replace some of the Russian barrels with Middle Eastern and U.S. crude oil, according to Alan Gelder, Vice President Refining, Chemicals and Oil markets, at Wood Mackenzie.

“The Middle East will have less medium-sour crudes going to Asia because of the growth in Russian volumes, so then they would push those barrels into Europe,” Gelder told Bloomberg.

U.S. crude oil and condensate exports to Europe are expected to have hit an all-time high of around 550,000 bpd in April, according to shipping programs, and traders expect the record pace to continue this year as U.S. oil grows ever more popular with European refiners, often at the expense of oil cargoes from OPEC nations and Russia.

According to Reuters data, Europe was the destination of 7 percent of all U.S. oil exports in 2017, but that percentage has now increased to 12 percent this year.

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7) Bucking Global Trends, Japan Again Embraces Coal Power
Science Magazine, 2 May 2018 
Dennis Normile

Most of the world is turning its back on burning coal to produce electricity, but not Japan. The nation has fired up at least eight new coal power plants in the past 2 years and has plans for an additional 36 over the next decade—the biggest planned coal power expansion in any developed nation (not including China and India). 

And last month, the government took a key step toward locking in a national energy plan that would have coal provide 26% of Japan's electricity in 2030 and abandons a previous goal of slashing coal's share to 10%.

The reversal is partly a result of the 2011 disaster at the Fukushima Daiichi Nuclear Power Station, which punctured public support for atomic energy. Critics say it also reflects the government's failure to encourage investment in renewable energy. The coal revival, they say, has alarming implications for air pollution and Japan's ability to meet its pledges to cut greenhouse gas emissions, which account for 4% of the world's total. If all the planned coal plants are built, it will "be difficult for us to meet our emissions reduction goals," Minister of the Environment Masaharu Nakagawa noted earlier this year.

Not long ago, coal was on its way out in Japan. In 2010, coal plants accounted for 25% of Japan's electricity, but the powerful Ministry of Economy, Trade and Industry (METI) planned to reduce that share by more than half over 20 years. The ministry counted on nuclear power to pick up the slack, with its share of the nation's electricity set to increase from 29% in 2010 to 50% by 2030.

But the 2011 Fukushima nuclear accident forced a reassessment. All 54 of Japan's reactors were shut down pending compliance with new safety standards. Just seven have restarted. Utilities have turned to liquefied natural gas and coal, which surged to provide 31% of the country's electricity in 2014.

In many other nations, natural gas has replaced coal as a fuel source because gas costs less. But in Japan, "coal is cheap," says Takeo Kikkawa, an energy economist at Tokyo University of Science and a member of an METI advisory council on energy. That's because the nation must import natural gas in its relatively expensive liquefied form.

The new energy plan would cement coal's central role. Endorsed on 26 March by an METI advisory council, and likely to be adopted by the Cabinet later this year, it calls for nuclear plants to be restarted, boosting their share of electricity generation to between 20% and 22% by 2030. Renewable energy's share would rise slightly, to between 22% and 24%, with solar energy alone accounting for 7%. But fossil fuels—coal, oil, and natural gas—would provide 56%.

That reliance on coal will make it difficult for Japan to fulfill its pledge to cut greenhouse gas emissions by 26% below 2013 levels by 2030, and by 80% by 2050. Those cuts will be even harder to achieve if now-shuttered nuclear power plants aren't restarted.

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8) And Finally: Europe’s Latest Green Flop: CO2 Emissions Rising
Reuters, 4 May 2018 

BRUSSELS (Reuters) – European Union carbon emissions from burning fossil fuels increased in 2017, statistics office Eurostat said on Friday, indicating that the reduction of emissions blamed for climate change remains a challenge.



Carbon emissions in the EU were up 1.8 percent from 2016, Eurostat said, with a double-digit increase in Malta and Estonia.

Finland and Denmark showed the sharpest declines while emissions in Germany, the bloc’s largest economy and still dependent on coal for 40 percent of its electricity, was little changed….

While the 2008 financial crisis had a dampening effect on industrial activity, recent increases in economic growth have been accompanied by higher emissions of carbon.

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The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.