Oil exports from U.S. jump 34% to record as shale output booms

1/7/2015

Oil exports from U.S. jump 34% to record as shale output booms

DAN MURTAUGH and BRIAN WINGFIELD

WASHINGTON (Bloomberg) -- The U.S. exported a record amount of crude oil in November after a five-year run of production growth that has made the country the most oil-independent in 20 years.

Shipments surged 34% to average 502,000 bopd in November, the most on record dating back to 1920, data from the U.S. Census Bureau and the Energy Information Administration show. The previous peak was 455,000 in March 1957. The U.S. is now the 17th-largest exporter.

The export record was unthinkable just five years ago, when U.S. crude production was still near a nadir after a 25-year decline. Since then, producers using horizontal drilling and hydraulic fracturing in underground shale rock have boosted output by 66%. Lawmakers in Washington are trying to end a 40-year-old law that restricts crude exports to just a few markets.

“This is something we never expected to see,” Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, said. “You look back at 2008, 2009, domestic production was half what it is now. We’re not just passing a benchmark in exports, this is going to be a trend going forward.”

Oil Exports

Shale oil from places like the Bakken formation in North Dakota and the Eagle Ford in Texas is typically light and has driven most of the growth in U.S. production. Light oil output increased to 4.5 MMbpd last year from 1.8 MMbpd in 2011, according to the Energy Information Administration.

Booming output has reduced the need for crude imports. Foreign barrels account for 43% of the oil in U.S. refineries, the lowest level since 1992.

About 91% of all crude exports, which included foreign-origin crude that has been stored in the U.S., went to Canada in November. The remainder included 608,241 bbl to Switzerland, 508,356 to Singapore, and 287,970 to China.

The U.S. is still a relatively small exporter on the global market. A half-million barrels a day is less than 10% of what Saudi Arabia exports and ahead of OPEC member Ecuador, according to data from the Joint Organisations Data Initiative.

Small Exporter

About 218,000 bopd left from northern places like Detroit, upstate New York and Maine. Another 174,000 exited via Texas ports like Houston and Corpus Christi. About 70,000 went through Montana and North Dakota, and 38,000 out of New Orleans.

The U.S. bans most exports of unrefined crude oil. Shipments to Canadian refiners are allowed, as are re-exports of foreign oil, and a few other small exceptions. Congress will discuss repealing the ban in 2015, Representative Ed Whitfield, a Kentucky Republican and chairman of the House Energy and Power Subcommittee, said at a Dec. 11 hearing in Washington.

For now, the existing exceptions are helping producers find higher-value markets for U.S. crude. The U.S. benchmark West Texas Intermediate was $2.50/bbl less than Brent on Jan. 7, from a $13.44 discount a year ago.

Reaching foreign markets is more important now than it was six months ago, with crude prices falling 55% since June as global production outpaces sluggish demand growth. WTI settled at $48.65 on Jan. 7, compared to $107.26 in June 20.

“Are you more desperate to get a better deal when you’re poor? I guess you are,” John Auers, executive V.P. at Dallas-based Turner Mason & Co. an energy consulting firm, said. “Producers are on the edge of profitability. They’re a little more incentivized now.”

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