As diplomats convene on the United Nations’ COP 28 climate change summit, fossil fuel production and consumption are hitting latest highs, and tanker owners are in prime position to take advantage of rising trade flows.
The Biden administration is a number one proponent of decarbonization, yet the U.S. is pumping out record volumes of hydrocarbons. America is on target to be the world’s largest producer and exporter of natural gas this yr, in addition to the leading exporter of refined products and liquefied petroleum gas.
There are also big wins — for energy producers and shipowners, not decarbonization advocates — on the crude oil front.
The U.S. produced 13.2 million barrels per day (b/d) of crude oil in September, based on data released Thursday by the Energy Information Administration. That’s the country’s highest monthly production level ever.
And never only is America producing more crude, it’s exporting a bigger share of the crude it produces, further boosting volumes aboard tankers certain for Europe and Asia.
Seaborne crude exports up 19% vs. 2022
Exports of U.S. crude were banned between 1975 and 2015. For 40 years, U.S. production could only be sold overseas if it was refined first, then exported as petroleum products.
The tip of the ban dramatically increased market opportunities for U.S. production, thereby stimulating higher output — creating more business for oil firms and tanker owners.
That upward momentum continues. Seaborne crude exports are tracked by commodity intelligence provider Kpler. In January-November, its data shows that U.S. seaborne crude exports averaged 4 million b/d, an all-time high and up 19% yr on yr.
Exports in November averaged 4.45 million b/d, the second-highest monthly average on record, just barely below the height of 4.46 million bpd in March.
Volumes rise sharply to each Europe and Asia
The Panama Canal is wreaking havoc on many cargo supply chains, nevertheless it has virtually no effect on U.S. crude exports.
U.S. crude exports to Asia are loaded on very large crude carriers (VLCCs; tankers that carry 2 million barrels) via ship-to-ship transfers within the U.S. Gulf. VLCCs are too large to transit either the Panama or Suez canals; they use the Cape of Good Hope.
U.S. exports to Europe are shipped aboard Aframaxes (750,000-barrel capability), Suezmaxes (1 million-barrel capability) and VLCCs.
For the reason that invasion of Ukraine, Europe has hiked its purchases of U.S. crude to assist offset banned Russian supply. In accordance with Kpler data, a median of 1.83 million b/d of U.S. crude flowed to Europe in January-November, up 26% from the 2022 full-year average.
Europe’s share of total U.S. crude exports has risen to 46% this yr in comparison with 37% in 2021, the yr prior to the invasion, while Asia’s share is 41%, down from 47% in 2021.
“In volumetric terms, the story has been all about Europe this yr,” Reid I’Anson, senior commodity analyst at Kpler, told FreightWaves. “Europe continues to grow increasingly reliant on U.S. energy — not only LNG [liquefied natural gas] but across the board.”
Despite the pull of Europe, U.S. crude exports to Asia have also continued to escalate. In accordance with Kpler data, exports to Asia are averaging a record-high 1.65 million b/d yr so far, up 15% from last yr and up 26% from 2021.
Rising volumes to Asia translate into profitable business for VLCC owners. Brokerage True North Chartering counted 40 spot VLCC cargoes loading within the U.S. Gulf in each October and November, matching the prior monthly high in April.
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