Exports hit all-time high last week

U.S. exports of crude oil are on the rise, and has surpassed 2 MMBOPD in three of the past four weeks, according to the EIA. Preliminary data suggests the U.S. exported 2,566 MBOPD last week, an all-time high.

Overall crude exports have averaged just under 1.7 MMBOPD this year, representing rapid growth. The country exported 1.1 MMBOPD in 2017, and only 0.5 MMBOPD in 2016. Perhaps most impressive about this expansion of exports, though, is that the U.S. is hindered by its ports, which make the process more difficult than in many other oil-exporting nations.

U.S. Oil Exports Take Complex Route to Foreign Markets

Source: EIA

Port dimensions restrict exporting options

The most economic vessels for shipping crude oil long distances are Very Large Crude Carriers (VLCCs). Capable of carrying about 2 million barrels of crude each, these massive ships, which can be over 1,000 feet long, are very popular for the long voyage from the Gulf to East Asian markets.

However, the size of these VLCCs is a major concern, and imposes restrictions on any port that wishes to use them. All the onshore U.S. ports in the Gulf that actively trade petroleum are located in inland harbors and connect to the ocean through shipping channels or rivers. These channels are big enough for most purposes, but none are deep enough and many are not wide enough to accommodate a loaded VLCC.

U.S. Oil Exports Take Complex Route to Foreign Markets

Source: EIA

Since VLCCs are too large to fit in any of the major ports in the Gulf, American exporters must resort to complex techniques to get oil onto these ships. The most common technique used involves ship-to-ship transfers of oil. Smaller tankers, those capable of carrying 500 to 1,000 MBBL, are able to fit in most U.S. ports, so these are used as intermediaries. Suezmax or Aframax ships will load at port facilities, then sail out to deeper portions of the Gulf to load onto VLCCs, a process called reverse lightering.

U.S. Oil Exports Take Complex Route to Foreign Markets

Source: EIA

Many of the major oil ports in the Gulf have designated lightering points, where ship-to-ship transfers can be performed. According to the U.S. Maritime Administration, lightering zones are the most popular ports of call for tankers carrying crude oil and petroleum products.

U.S. Oil Exports Take Complex Route to Foreign Markets

Source: EIA

LOOP can fully load VLCCs, but similar ports are a long way off

While none of the onshore ports is able to load VLCCs, the Louisiana Offshore Oil Port (LOOP), located several miles out from the coast, is able to perform this task. Historically, LOOP has been exclusively used for imports, but gained the capacity to export oil earlier this year. The added capacity LOOP represents is already noticeable, as at least two of the weeks when exports exceeded 2 MMBOPD corresponded with weeks in which LOOP loaded a VLCC.

The Maritime Administration, which permits deepwater offshore ports, has no pending applications for a facility like LOOP so direct loading of VLCCs will remain limited in the next few years. Corpus Christi, however, intends to load VLCCs from a coastal port and is overhauling its channel to accomplish this. Oxy demonstrated it is possible to dock a VLCC at its Corpus Christi facilities last year, so maneuvering the vessel is feasible. When the Corpus Christi dredging project is complete, VLCCs will be able to load most of the way from Corpus Christi, then sail into the Gulf to be topped up by a small tanker.

These complex arrangements are not cheap, and require a spread between Brent and WTI to make it worthwhile. The WTI-Brent spread, therefore, directly impacts where U.S. crude will be exported. While smaller tankers that can load directly are competitive for short transport distances, shipping oil to Asia requires a VLCC to be worthwhile, and therefore requires a larger spread between WTI and Brent.

U.S. Oil Exports Take Complex Route to Foreign Markets

Source: EnerCom Analytics


Legal Notice