Waterborne exports of U.S. crude reached a record-high amount in April, according to Genscape’s North American Waterborne report. The trend of high export volumes is expected to continue due to an ongoing, relatively wide NYMEX Light Sweet crude (WTI)/ICE Brent spread.
Crude exports in April, all from the U.S. Gulf Coast, averaged 2.053mn bpd, a 489,000 bpd increase from March. Genscape data showed the 31 percent month-to-month gain led the April average to surpass the previous high in October 2017, which was 1.843mn bpd.
The biggest recipients of U.S. crude exports in April were Asia and Europe, as both regions took in record-high amounts at 863,000 bpd and 697,000 bpd, respectively. According to Genscape, the April averages were 305,000 bpd and 131,000 bpd higher than March postings.
Delivery locations also included ports on the Canadian East Coast, India, the Middle East, South Africa, the Caribbean and South America that month.
Genscape data showed that refiners in East Asia took in the largest portion of the American crude, at 714,000 bpd in April, up 278,000 bpd from March. Chinese refiners received 498,000 bpd, while the largest single location to import American crude to the region was Ulsan, South Korea, home to SK Energy’s 850,000 bpd refinery, which received three separate cargoes carrying a combined 4.348mn bbls.
In Europe, the United Kingdom received the most of any sub-region at 273,000 bpd, which was a decrease of 29,000 bpd month-on-month, with shipments to Fawley, Pembroke and Transmere. Genscape analysts saw that the storage hub of Rotterdam, Netherlands, took in the most U.S. exports of any single location in Europe via six cargoes, carrying a total 4.715mn bbls.
Exports Affect Regional Crude Storage
Relatively high export volumes contributed to a destocking trend along the Texas Gulf Coast. Inventories fell more than 6.6mn bbls between weeks ending March 9 and May 4, including a 1.8mn-bbl draw for week ending May 4, according to Genscape’s Texas Gulf Coast Crude Storage report.
Genscape noted storage levels in Houston accounted for more than 3mn bbls of the two-month draw in the broader region. Waterborne loadings averaged 488,000 bpd during the past five weeks, compared to the Q1 2018 average of 415,000 bpd.
Additionally, loadings from the Galveston Offshore Lightering Zone (GOLA) averaged 803,000 bpd through the past five weeks, compared to the Q1 2018 average of 489,000 bpd. GOLA has the capability to load Very Large Crude Carriers (VLCCs), which can improve export economics by allowing shippers to load more than 2mn bbls aboard one vessel. There were 15 cargoes loaded from GOLA in April, 11 of which carried at least 2mn bbls, according to Genscape. The lightering zone primarily sources crude from Houston.
Additionally, Corpus Christi, TX, inventories decreased 2.4mn bbls between weeks ending March 9 and May 4, with more than half of the draw taking place in the past three weeks. Corpus Christi waterborne loadings in 2018 averaged 502,000 bpd through week ending May 4, compared to the 2017 average of 407,000 bpd, but did not increase substantially in recent weeks. Loadings averaged 512,000 bpd during the past five weeks, compared to the Q1 2018 average of 499,000 bpd, Genscape analyst reported. The port of Corpus Christi plans to increase the depth of the port to fully load VLCCs in 2020 and has already successfully tested partially loading a VLCC earlier this year.
Wide Arbitrage Spread, Other Factors Lead to High Exports
The new high water mark for exports was spurred by an inflated Dated Brent price and a relatively wide WTI/Brent spread, in addition to low freight costs and demand from foreign refiners that have grown fond of the U.S. barrels in their crude slates, according to market sources.
The export surge initially began following a widening of the WTI/Brent spread after Hurricane Harvey hit the U.S. Gulf Coast in late August 2017, when more than 20 percent of the nation’s refining capacity was shuttered, according to Genscape’s North American Refinery Intelligence report.
The front-month WTI/Brent spread in 2017 pre-Harvey averaged $2.75/bbl, but following the storm it closed out the year at an average of $5.99/bbl.
The wider spread presented an opportunity for foreign refiners to run relatively cheaper WTI-based crudes. Genscape analysts observed that exports before Harvey averaged 688,000 bpd from January 2017 through August 2017, but closed out the year at an average of 1.416mn bpd post-Harvey.
Through April 2018, the WTI/Brent spread averaged $4.61/bbl. During the same time period, Genscape waterborne data showed that, exports shipped to foreign docks at an average of 1.626mn bpd.
Market sources noted relatively low freight rates have contributed to the recent upswing in exports, as they averaged approximately $1.50/bbl to Asia and $2.00/bbl to Europe during week ending May 4.
As long as the low shipping rates persist, and with the WTI/Brent spread averaging $5.44/bbl in April and $5.56/bbl this month through May 9, crude exports at these levels are expected to continue.
Access Genscape’s North American Waterborne Crude report to gain a more complete understanding and stay up-to-date on the U.S. crude oil delivery supply chain, published weekly. This includes monitoring of domestic loadings of exports with ship names, volumes carried, and destination information to help traders make more informed decisions knowing where the marginal barrel of oil is going. To learn more, or to request a free trail of Genscape’s North American Waterborne Crude report, please click here.
This report compliments the Genscape’s Texas Gulf Coast Crude Storage report, which tracks Texas Gulf Coast crude oil storage capacity and construction trends weekly to provide a better understanding of market fundamentals. Click here to learn more about our Texas Gulf Coast Crude Storage report.
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