US Gulf Coast Crude Oil Import Shake-up: Analysis

By George Backwell
Wednesday, May 21, 2014
VLCC File photo

The increase in domestic crude oil production is widely reported to have flipped US import requirements on their heads. While this holds true for light/sweet crude oil producers, there appears to be even more dependence on heavier/sourer crude oil suppliers in spite of the shale oil boom, reports Poten & Partners in their recent 'Poten Tanker Opinion'.

With traditional light/sweet suppliers like West Africa and Europe out of the fray, it is easier to observe the net results of forces that dictate from where the US sources its imports. Investments and long‐ term relationships will support long‐haul trade to the US, benefitting VLCC ton‐mile demand. However, Canada’s position as a supplier to the US Gulf Coast presents looming competition to such seaborne imports.

A look at the pricing differentials between Arab Medium crude oil and other grades, identifies the relative price strength of Saudi‐sourced barrels to US and Asian end‐users.

While baseline supply commitments are generally stable and established through term sales contracts, price discounts can indicate where above‐the‐ baseline crude oil production may be marketed.

Since the end of 2011, Arab Medium price discounts have tended to favor the US market (when the differential is below $0). This was likely the result of two factors: required crude oil stocking in anticipation of Aramco’s joint‐venture Motiva refinery Q1 2012 expansion and the calibration of US domestic crude oil prices with the introduction of new and competitive grades.

Transportation inefficiencies and physical constraints had thus far restricted the flow of domestic crude oil to thirsty Gulf Coast refiners causing these grades to trade at a steep discount compared to seaborne alternatives.

Although there is, what appears to be, continued improvement in Canadian and US crude oil transportation efficiency (pipelines, waterborne trade, etc.) improving the flow of local crude oil to the US Gulf coast, until new projects come to fruition, demand for incremental Saudi barrels could increase.

The strengthening of ties between Caribbean producers, such as Venezuela and Colombia, and China has limited supplies of short‐haul heavy/sour crude oil in the US Gulf. As a result, Saudi Arabia has become a larger percentage of the overall picture. Saudi Arabian crude oil now accounts for approximately 25% of total imports, which marks a significant increase from the 9‐11% range that was experienced as recently as 2010.

Further supporting VLCC ton‐mile demand, it is likely that the Caribbean to Far East trade flow will only strengthen as Chinese credit offered in exchange for oil supplies has the makings of a long‐term symbiotic relationship for many producer nations. In fact, recent news cites that Chinese companies are expressing interest in becoming producers in Mexico, as the country works to opens its doors to foreign participants.

In the future, the US Gulf could require an arguably higher proportion of heavy crude to mix with domestically‐produced light inputs. Although Canada will undoubtedly play a larger role in the supply mix over time, dwindling Caribbean supplies of heavy/sour crude oil will likely strengthen the US’s reliance on Saudi Arabian crude oil. With the US Gulf Coast expected to become more dependent on Saudi Arabian crude oil, more westbound cargoes could be afoot.

Source: Poten & Partners

http://www.poten.com/
 

Maritime Reporter July 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Odfjell Reports Best Quarter Since 2008

In what it is calling its best quarterly performance since third quarter 2008, the Odfjell Group for the second quarter of 2015 reported net results of $7 million.

Great Lakes Shipyard to Build Guatemalan Harbor Tug

U.S. shipbuilding and repair yard Great Lakes Shipyard informs it has signed a contract to build another of its HandySize Class, 3,400 HP twin-screw tugboat for

BAE Systems Welcomes Record Number of Paid Interns

More than 140 university students from across the country are being given a unique insight into working life at BAE Systems, as part of the company’s 12-week summer internship program.

Tanker Trends

Oil Soars in Biggest One-day Rally in Years

Oil rocketed as much as 10 percent higher on Thursday, posting its biggest one-day rally since 2009 as recovering equity markets and news of diminished crude supplies

Odfjell Reports Best Quarter Since 2008

In what it is calling its best quarterly performance since third quarter 2008, the Odfjell Group for the second quarter of 2015 reported net results of $7 million.

N-KOM: New VLCC Size Floating Dock

Nakilat-Keppel Offshore & Marine (N-KOM), the joint-venture shipyard of Keppel Offshore & Marine and Nakilat, continues to see strong interest for its ship repair services in 2015,

Ports

Odfjell Reports Best Quarter Since 2008

In what it is calling its best quarterly performance since third quarter 2008, the Odfjell Group for the second quarter of 2015 reported net results of $7 million.

Damen Delivers Ice Class Tug to Lithuania

The Damen Shipyards Group has delivered an ASD Tug 2810 ICE to Klasco Towage Assistance, an affiliate of Klaipeda Stevedoring Company (KLASCO). The largest tugboat

DP World H1 Earnings Jump, Mulls Iran launch

DP World may launch operations in Iran, the company's chairman said on Thursday, as the global ports operator reported a jump in half-year earnings after buying assets from its parent company.

Finance

Oil Soars in Biggest One-day Rally in Years

Oil rocketed as much as 10 percent higher on Thursday, posting its biggest one-day rally since 2009 as recovering equity markets and news of diminished crude supplies

Odfjell Reports Best Quarter Since 2008

In what it is calling its best quarterly performance since third quarter 2008, the Odfjell Group for the second quarter of 2015 reported net results of $7 million.

ASRY 2015 Strategy Combats Challenging Market

Up to May 2015, ASRY (Arab Shipbuilding & Repair Yard), was seeing encouraging results from it’s 2015 strategy to combat the widespread challenges facing the maritime repair market,

Logistics

DP World H1 Earnings Jump, Mulls Iran launch

DP World may launch operations in Iran, the company's chairman said on Thursday, as the global ports operator reported a jump in half-year earnings after buying assets from its parent company.

Rosneft, EGAS Ink LNG Supply Deal

Rosneft Trading SA, a company of Rosneft Group, and the Egyptian Natural Gas Holding Company (EGAS) signed a Master LNG Supply and Purchase Agreement. The document

RoRo Operations Start at APM Terminals Pipavav

APM Terminals Pipavav (Gujarat Pipavav Port Ltd) and NYK Auto Logistics (India) today announced the commencement of RORO operations at Pipavav Port. Ford Motors

Consulting

DNV GL Wins Frame Agreement with CLP Hong Kong

DNV GL, the technical advisor to the oil and gas industry, has been awarded a framework agreement by CLP Hong Kong to deliver risk management advisory services for its Asia Pacific operations.

MN 100: Baker Marine Solutions, LLC

The Company: Baker Marine Solutions (BMS) is an industry leader providing marine assurance and consulting services, performing DP assurance, OCIMF- OVID inspections,

Mariners Dread Port Calls

Seafarer social media site Crewtoo, part of KVH Industries, Inc., has published the results of its second Crewtoo Seafarers Happiness Index report detailing job satisfaction at sea.

 
 
Maritime Standards Naval Architecture Navigation Pipelines Pod Propulsion Salvage Ship Repair Ship Simulators Shipbuilding / Vessel Construction Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.6102 sec (2 req/sec)