BIMCO: US crude oil exports now more important to shipping than US oil product exports
The United States (US) government lifted their restrictive policy on crude oil exports in December 2015. In September and October 2017, increased demand from Asia and Europe has caused US seaborne export of crude oil to surpass the US seaborne export of oil products in terms of billion tonne miles.
This is due to US crude oil being exported twice the sailing distance of US oil products. In October the seaborne exports of crude oil amounted to 46 billion tonne miles whereas the US export of oil products was equivalent to 43 billion tonne miles.
Despite the US seaborne exports of crude oil, being half the amount of seaborne oil product exports in October 2017 (in terms of volume) it is now more important to the tanker shipping industry. This is due to the average sailing distance per exported tonne of crude oil being more than double the distance than the exported oil products.
BIMCO’s Chief Shipping Analyst Peter Sand comments: “The increased US crude oil exports during 2017 benefits the crude oil tanker shipping industry. The demand on that trade is up by 151% compared to last year. Not only are the volumes more than doubling, the sailing distances are increasing as well.
US crude oil exports are now more important to shipping than US oil product exports.
Asia and Europe are the importers demanding most US crude oil in 2017. With Asia in particular being responsible for the longer sailing distances”.
Asia and Europe demand US crude oil
For the first 10 months of 2017, the US seaborne export of crude oil has increased 151% compared to same period last year. This amounts to an additional 20 million tonnes of crude oil being available to the shipping market, equivalent to 7.5 VLCC cargoes being exported more per month compared to last year.
While the average distance per exported tonne of US crude oil for the first 10 months of 2016 was 4,277 nautical miles, it has been 7,090 nautical miles for the same period in 2017. In October alone Europe has already taken an amount of crude oil similar to the amount imported in each of the previous quarters of 2017. Thereby, the average sailing distance has dropped a bit from Q3 2017, but still remained above 7,000 nautical miles.
In terms of volume, the three largest importers of US seaborne crude oil in 2017 are China, Canada and the United Kingdom. China is by far the main player, importing 25% of total exports, while Canada 15% and United Kingdom has imported 9%. Despite Canada being one of the largest importers in terms of volumes, they generate a low amount of tonne miles. This being due to the close geographical proximity to the US and thereby limited sailing distances.
China diversifies portfolio of crude oil partners
China, being the main importer of US crude in 2017 is not only due to rising Chinese crude oil demand. BIMCO’s recent report covering Chinese oil imports showed that the Middle Eastern countries share of Chinese crude oil import has declined three years in a row. China imported 55% from the Middle East in 2015, whilst importing 45% from the Middle East during the first 10 months of 2017. Countries such as the US, Angola, Brazil, Venezuela, Russia and United Kingdom have experienced rising Chinese imports.
“China is diversifying their crude oil supplier portfolio by shifting away from being too dependent on Middle Eastern crude oil. China sourcing more crude oil from the US instead of the Middle East benefits the crude oil tanker industry with longer distances. As 97% of all seaborne US crude oil is exported from the US Gulf. The sailing distance to China is double the distance of Middle Eastern export to China and thereby tonnage is tied up for longer periods, benefitting crude oil tanker demand” adds Peter Sand.
Corpus Christi is by far the biggest crude oil exporting port in the US
Texas based ports’ market share has surged, together with the US seaborne exports of crude oil. US has exported 79% of all crude oil via sea from Texas during the first 10 months of 2017, up from 69% for the same period in 2016. In terms of volume, the Texas loading area has ramped up their export of crude oil by 186% for the first 10 months of 2017 compared to the same period in 2016. This amounts to an additional export of 17.3 million tonnes, 85% of the total increase in US seaborne crude oil exports.
The most influential ports are Corpus Christi, Beaumont, Houston and Gramercy, exporting 33%, 21%, 15% and 14% of US seaborne crude oil respectively. Thereby, only four ports export 83% of the total US seaborne crude oil. Corpus Christi has since 2016, where it exported 24% of US seaborne crude oil, extended its lead and has developed into the largest crude oil export port in the US – by far. Corpus Christi port will have VLCC accommodating terminals by the end of 2018. Thereby crude oil destined for China will travel 15,000 nautical miles instead of 10,000. This will bring considerable extra tonne-miles to the crude oil tanker shipping industry.
Source: Peter Sand, Chief Shipping Analyst; BIMCO