The Biggest Oil Story Of 2017
There have been plenty of eye-catching stories in the energy industry this year, but one notable development has been the rise of the U.S. as a crude oil exporter.
The ban on crude exports from the U.S. was lifted at the end of 2015, and exports ticked up in the following year, but only modestly. 2017, however, was the year that the floodgates opened.
In the first half of the year, there were several weeks when the U.S. topped 1 million barrels per day (mb/d), but exports averaged about 750,000 bpd between January and June.
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In the third quarter, the export machine really kicked into high gear, and Hurricane Harvey was arguably the spark. It may seem odd at first blush that a disastrous storm that ravaged Texas would be the thing that spurred a rise in U.S. oil exports, but because so many refineries were damaged, a lot of the oil produced in Texas had to go elsewhere.
That surplus of crude and the temporary shortage of refining capacity was visible in the discount for WTI relative to Brent, a price differential that widened to as much as $7 per barrel after the storm, the largest disparity in years. If you are a buyer in say, China, paying $7 less per barrel than elsewhere is pretty appealing, even after factoring in high transport costs. As such, it is no surprise that U.S. oil exports to China surged this year.
U.S. oil exports hit a high at 2.133 mb/d in the last week of October, and have fallen back a bit since. In fact, it would seem to be a struggle for the U.S. to maintain such a high level of shipments. The more oil that is exported, the more likely the discount between WTI and Brent would narrow, which would essentially eat away at the competitiveness of U.S. crude.
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