US set to become a net oil exporter by 2023

EPA/PAUL BUCK/FILE PICTURE

A file photograph showing an offshore drilling rig works in the Gulf of Mexico off the coast of Louisiana, US.

US net oil exporter status to be buffer to such as Harvey, S&P Global Platts Analytics’ PIRA Energy says


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The United States, as a net oil exporter, will also have a larger buffer against any extreme weather events, as we just saw with Hurricane Harvey, said Paul Sheldon, senior oil analyst, S&P Global Platts Analytics’ PIRA Energy.

The US is set to become a net oil exporter by 2023, as rising shale liquids output continues to outpace oil demand growth, according to the latest S&P Global Platts PIRA Energy August special report.

In the meantime, rising Canadian imports will make the US a net oil exporter to the world outside North America by 2019. Lower oil import dependence will likely have political implications, including a growing temptation to use SPR sales to fund non-energy items. Calls for a reduced military presence in the Middle East could also grow louder.

US net oil imports, as simply measured by total liquids supply minus oil demand, peaked in 2005 at 12.5 million barrels per day. By 2017, total US liquids production rose by 87% to 15.6 million barrels per day, and net oil imports fell to 4.4 million barrels per day. “We estimate the US will shift to a net oil exporter by 2023, with net exports forecast to reach 3.3 million barrels per day by 2031,” S&P Global Platts Analytics’ PIRA Energy said.

The headline net oil import figure does not tell the complete story of US oil trade flows. The US remains a large net importer of crude, at over 7.0 million barrels per day in 2017 (3.0 million barrels per day from Canada, and around 2.0 million barrels per day from both Latin American and the Middle East).

At the same time, in 2017 PIRA forecasts the US will be a net exporter of 0.9 million barrels per day of the four major refined products (gasoline, diesel, jetkero, and fuel oil). NGL exports are also growing as a result of higher shale production, reaching 1.4 million barrels per day in 2017.

One likely implication of an improving oil trade balance could be on the Strategic Petroleum Reserve (SPR). The government created this emergency stockpile in the wake of the Arab oil embargo in 1973-74, in order to alleviate the economic impact of oil supply disruptions. But since late 2015, three pieces of non-energy legislation have mandated 149 million barrels of SPR sales from 2017-2025. With US shale production projected to nearly double from 7.4 million barrels per day in 2017 to 14.2 million barrels per day by 2025, the temptation for lawmakers to tap the SPR for unrelated items will likely grow.

Political discussions over potential SPR sales extend beyond Congress to the White House as well. In March 2017, a Trump Administration budget proposal included $16.6 billion in SPR sales between Fiscal 2018 and 2027 (245 million barrels using PIRA’s WTI price forecast), S&P Global Platts Analytics’ PIRA Energy said. The proposal is unlikely to pass in its current form, but demonstrates how many politicians view non-emergency SPR sales as more politically palatable than tax hikes to plug spending gaps.

 

 

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