With U.S. crude oil production up 150 percent to 12.4 million b/d since 2008, the great American shale boom has collapsed imports from OPEC.
In 2018, OPEC met less than 15 percent of total U.S. oil demand, down from over 30 percent in 2007.
Overall, U.S. imports from OPEC have sunk to their lowest levels since 1986.
In particular, U.S. imports from Nigeria, a longtime supplier that has major production problems and inconveniently sells the lighter type of crude that has been overflowing from America’s shale fields, has fallen 85 percent to 190,000 b/d.
Imports from Saudi Arabia are down over 70 percent, although it still accounts for a third of the 1.4 million b/d that OPEC ships to the U.S. per the latest EIA data.
The loss of OPEC oil in the U.S. market has really come from a triad of factors: surging U.S. crude production, Saudi Arabia’s production cuts, and strong U.S. sanctions on Venezuela.
In addition, the fall reflects a broader trend of OPEC understandably trying to shift sales to the fast-growing Asian markets. Since 2008, for instance, China and India have accounted for 60 percent of the 13.4 million b/d increase in global oil demand. And these two giants will lead the non-OECD Asian nations that the EIA projects will account for 75 percent of the 20 million b/d in new global demand through 2050, as far out as the EIA currently models.Much more at the link.
The right kind of oil: Canada.
Indeed, with its heavier oil a match for the U.S. refining system, largest trading partner and firm ally Canada has filled in nicely for the fall of OPEC. In the shale-era since 2008, Canadian oil exports to the U.S. have almost doubled to 4.7 million b/d. Over the past four years, Canada alone has shipped more oil to the U.S. than all OPEC nations combined.
Canada now meets nearly 25 percent of total U.S. oil demand, more than double its share from a decade ago. Canadian oil has benefitted the U.S. by compensating for the falling heavy oil production in longtime suppliers Mexico and Venezuela.
It has been neighbor Canada that has helped supply those parts of the U.S. that are too distant to take-in the huge amounts of shale oil coming from Texas and North Dakota.
The key exception here is California, where sea-borne shipments from Saudi Arabia, Ecuador, and Colombia have come to replace Canada and dominate the market.California buys Saudi Arabia oil ($60) vs Canadian oil ($40):
- WTI: $50/bbl
- Saudi: $60/bbl
- Canadian crude index: $40
- Western Canadian Select: $40
Those price difference reflect transport costs and pipeline bottlenecks. If you put sell them side by side, WTI will get a couple bucks over Saudi medium sour and maybe a couple more over Canadian heavy sour.
ReplyDeleteThat may be -- I really don't know. Something tells me there is a bit more to it than that -- simply transportation costs explaining the difference, but you are probably correct.
DeleteLook at the difference in same quality oil (~40 API gravity and less than 0.5% S) but sold at different sales points):
DeleteGrade: pricing location: price
Bakken: Clearbrook: -$8
WTI: Cushing, OK: baseline
WTI: Houston: +$3
WTI: Rotterdam: +$5.50
Brent: London: +$6
So as much as a $14 difference from ND to London for same exact oil. (And this is moderate...can be way worse. Heck, look at natural gas which is straight methane and the large differences based on sales point.)
I routinely see people confusing the impact of crude quality with location. Essentially if you are comparing crude quality A, sold at location A with crude quality B, sold at location B, you can't determine what is driving the difference. It's one equation with two unknowns.
If you want to know the impact of crude type on price, you have to look at two different types sold in the SAME location. If you want to know the impact of location, you have to look at the same type sold in different locations.
Essentially this is a high school algebra insight. Any time you read some junk on oilprice.com or reuters or the WSJ, watch out for this basic concept. On the other hand RBN does not say stupid things like the above riffraff. They are very familiar with the impact of location and how to differentiate crude type price differences from location differences. So if you read RBN, you're almost always fine. If you read the popular media, be on alert for their logical flaws.
Agree 1,000%.
DeleteMany other variables also such as spot price and six-month contract delivery prices.
Thank you for the kind comments on RBN Energy: best educational site out there, from my perspective.