Bloomberg: US crude oil exports set to hit new records in 2023

US crude sales abroad are set to hit new records next year as U.S. crude gains more market share in Europe.

Earlier this month, weekly government data showed an unprecedented 5 million barrels per day of US crude. According to the most optimistic in the oil industry, the supply volume will average more than 4 million barrels per day in the next few months and next year, Bloomberg reported on August 24. 

In a world struggling with one of the worst energy crises in history, the US is steadily emerging as the top supplier of extra barrels. It is likely to remain so as OPEC+ spare capacity is limited and the EU plans to wind down most purchases of Russian oil in December.

Fuel prices soared after Russia’s invasion of Ukraine turned the tide, while “extraordinary” volatility in the oil futures market as a result of low liquidity prompted Saudi Arabia’s oil minister to consider further supply cuts despite a shortage in consumer countries.

US suppliers, which have captured market share across Europe, are likely to hold onto it for the next two years as other producers, including those in the North Sea and West Africa, are not growing output as steadily, said Conor McFadden, head of oil companies of Europe in Trafigura, among the largest exporters of American oil.

While the drawdown of U.S. crude stockpiles this fall may briefly slow exports, it is unlikely to affect this huge outflow in the long term, according to a survey of industry analysts. U.S. drillers are ramping up production, albeit at a moderate pace, and the country’s refining capacity is not expected to increase, leaving more oil for export.

In fact, weekly exports topped 4 million barrels per day for several weeks for the first time since the export ban was lifted in late 2015, according to the latest Energy Information Administration data released on August 24.

According to oil analysts ESAI Energy, Rapidan Energy Group and Kpler, annual U.S. crude oil shipments abroad will average between 3.3 million bpd this year and 3.6 million bpd from nearly 3 million in 2021. According to ESAI oil analyst Elizabeth Murphy, outflows are likely to average 4.3 million next year.

Much of that will be met by the Europeans building new supply lines ahead of a December boycott of Russian energy by the region’s trading bloc. The U.S. now accounts for only about 16% of Europe’s waterborne crude imports, up slightly from 15.3% before the war, said Rohit Rathod, senior oil market analyst at Vortexa.

And there is an opportunity to capture a larger share of the Russian market. “EU-27 countries are still receiving about 1.1 million barrels of Russian offshore oil per day,” said Kpler oil analyst Matt Smith.

It’s not just about filling Europe’s energy hole left by Russia. US streams are already replacing barrels from other traditional suppliers to Europe, including Kazakhstan, where its main CPC crude has faced repeated export disruptions due to technical problems.

The influx of US barrels also put pressure on regional European crudes. Earlier in the week, Ekofisk crude, a light sweet grade in the North Sea that competes with U.S. supplies, was trading about $3.50 above dated Brent. That’s up from about $7 a month earlier. Meanwhile, Forties crude, another North Sea grade, was trading at a 70 cent discount to dated Brent, compared with a premium of more than $5 a month earlier.

Looking ahead, purchases from Asia are also key to keeping US crude oil exports high. Over the past two months, Asian countries have scooped up large volumes of US oil as competition for supplies from the Middle East has intensified. Despite this, larger volumes of Russian oil are still going to China and India after the invasion of Ukraine.