US to become net exporter of crude oil in 2023

The United States has become a global crude oil exporting power over the last few years, but exports have not exceeded its imports since World War II. That could change next year.

Sales of US crude to other nations are now a record 3.4 million barrels per day (bpd), with exports of about 3 million bpd of refined products like gasoline and diesel fuel. The United States is also the leading liquefied natural gas (LNG) exporter, where growth is expected to soar in coming years.

The United States consumes 20 million barrels of crude a day, the most in the world, and its output has never exceeded 13 million bpd. Until recently, the idea that it would be anything but a big crude importer was folly.

Last month, the US government data showed net US crude oil imports fell to 1.1 million barrels per day (bpd), the lowest since record keeping began in 2001. That is down sharply from five years ago, when the United States imported more than 7 million bpd.

Factors changing that equation this year include sanctions hurting Russia's exports of oil and natural gas following its invasion of Ukraine, and Washington's massive release of oil from emergency reserves to combat spiking gasoline prices.

"Russia's invasion of Ukraine has spurred new demand for US energy and should push oil exports above imports late next year assuming shale output accelerates," said Rohit Rathod, market analyst at energy researcher Vortexa.

To become a net exporter of crude, the United States needs either to boost production or curtail consumption. US petroleum demand is expected to rise 0.7% to 20.51 million bpd next year, meaning production has to be rise.

The United States already produces more oil than any other country in the world including Saudi Arabia and Russia. US shale fields are aging and production growth this year has been sluggish. Overall output should reach a record 12.34 million bpd next year - but only if prices are lucrative enough to encourage oil drillers to pump more.

European refiners have snapped up US grades to offset the loss of Russian oil, and with U.S. crude's deeper discounts to global benchmarks, Asian refiners have stepped up purchases to 1.75 million barrels per day, data analytics firm Kpler said.

Export terminal operators are rushing to boost their capacity to better service the giant tankers that can carry more than 2 million barrels of oil.

"Russia has proven to be an unreliable supplier," said Sean Strawbridge, Chief Executive of the largest US oil export facility, Port of Corpus Christi. "That really creates a wonderful opportunity for American producers and American energy."

Corpus Christi could see a 100,000 bpd increase in exports next year, Strawbridge said, on top of the record shipments of 2.2 million bpd in October.

Analysts said net exports could taper off if numerous countries worldwide fall into a recession, hampering demand, and if further relaxation of sanctions on Venezuelan crude oil boosts that country's shipments.

 

United States and changing dynamics of MENA

The Saudi hosting of Chinese President Xi Jinping, on December 08, underscored the dramatic clarification in 2022 of Saudi Arabia’s multipolar foreign policy, very much mirroring the United Arab Emirates’ decisions over the course of the year.

Global events, particularly the split in Gulf countries’ reactions over Russia’s aggression in Ukraine as well as the October oil production cut determined by the Saudi-dominated OPEC Plus consortium, exacerbated differences with the United States, including on issues ranging from Iran to human rights and civil liberties concerns. Popular perceptions in the United States and in the region as well have characterized these actions as reflecting hostility, especially toward the Biden administration.

In fact, the Gulf’s differences with the US have been on the rise for many years. Frustrations over US policies — ranging from the 2003 invasion of Iraq to the response to the 2011 Arab Spring popular uprisings and including the 2015 agreement with Iran on its nuclear program — have encouraged closer relations with other great powers, namely China and Russia.

Notably, China has emerged as the region’s number one trade and economic partner, while Russia, aided by President Vladimir Putin’s aggressive wooing of Gulf counterparts, has become a key partner in the global energy sector.

At the same time, a new generation of leaders in the Gulf, especially Saudi Arabia’s crown prince, Mohammed bin Salman, and the UAE’s president, Mohammed bin Zayed al-Nahyan, came to power more determined to pursue an independent foreign policy course that they considered more reflective of their nation’s leadership in regional and global affairs.

Included in that determination is a willingness to break with Washington on the response to global issues spanning the gamut, from the Ukraine war to Libya to the Horn of Africa.

As President Joe Biden’s visit to the region in July exemplified, this shift by the leading Gulf states to a multipolar policy does not mean necessarily that US relations with the region have become obsolete.

Given the Gulf Cooperation Council (GCC) members’ reliance in the defense and security realm not only on the US defense umbrella but also on US equipment, training, and doctrine for their own militaries, it’s unlikely that the GCC states would willingly move away from a continuation of that relationship. But it does mean that US policymakers can no longer assume that Gulf governments will follow a US lead on setting policy for either regional or global issues.

Going forward, to ensure Gulf cooperation, the US side will need to make the case that its policy preferences are consistent with Gulf leaders’ perspectives on their own national interests. Initiatives like the Joint Working Group on Iran should be increasingly a centerpiece of US engagement with the region.

 

 

 

 

 

Suez Canal Authority inks MoU with Maritime Anti-Corruption Network

According to Seartrade Maritime News, Suez Canal Authority (SCA) and the Maritime Anti-Corruption Network (MACN) have signed a Memorandum of Understanding to provide a framework for cooperation.

The Suez Canal is a blackspot for petty corruption involving vessels transiting the waterway and MACN has been building its engagement with SCA. The MoU aims to establish an official communication channel between the Authority and MACN.

Admiral Osama Rabie, Chairman of the Suez Canal Authority, stressed that the Authority spares no effort to work on the stability and sustainability of global supply chains to facilitate traffic in the Suez Canal amid a package of effective measures that guarantee transparency and impartiality, with the Authority’s readiness to provide all capabilities and overcome all obstacles to activate cooperation with all partners and organizations working in the field of maritime transport.

Cecilia Müller Torbrand, CEO of the Maritime Anti-Corruption Network, thanked the Chairman of the Suez Canal Authority Admiral Osama Rabie, and the Authority’s work team, stressing that the Suez Canal occupies a special place in the maritime community, highlighting the need for cooperation to promote effective and safe trade.

The memorandum was signed by the representative of the Suez Canal Authority, Engineer Gamal Abu Al-Khair, Director of the Transit Department.

The Suez Canal links east and west cutting out a lengthy transit via the Cape of Good Hope and over 22,030 ships transited through the canal during the fiscal year 2021-2022.

However, complaints over corruption by users of the waterway are longstanding. In MACN’s report on its first 10 years of reporting between 2011 and 2020 the Suez Canal topped global risk hotspots. A total of 1,795 incidents were reported in the canal during the 10-year period. Most of the incidents were petty corruption with 1,626 involving demands for cigarettes.

Pakistan Stock Exchange witnesses lackluster movement

The week ended on December 16, 2022 witnessed a range-bound movement of the benchmark index. The highlight of the week was Thursday when the market took a hit and the index posted 1.0%WoW decline to close at 41,301 points.

Economic uncertainty caused by enhanced delays in the 9th Review of the IMF program, along with rising interest rate led to a lackluster sentiment in the market. Further exasperating the sentiment is the critical level of the country’s foreign exchange reserves, having dropped to USD12.6 billion. Average daily trading volume decreased further by 9.9%WoW, down to 180 million shares.

Major news flows during the week were: 1) five financing pacts worth US$775 million inked with ADB, 2) IMF wants to observe 3 more quarters, examine flood rehab plan, 3) Saudi Arabia may increase the amount of oil supply to Pakistan on deferred payments to US$2.4 billion a year, 4) Reko Riq project got green signal with definitive agreement signed, 5) Jul-Nov workers’ remittances decline 9.8%YoY, 6) Fed raised rates by half percentage point, sees economy nearing stall, and lastly 7) Jul-Oct LSM sector output down 2.89%YoY.

The top performing sectors were: Miscellaneous, Tobacco, REIT, Textile Composite, and Vanaspati & Allied, while the least favorite sectors were: Leasing companies, Automobile Parts, Close-end Mutual Funds, Refineries, and Jute.

Stock-wise, top performers were: PSEL, PAKT, SYS, ENGRO, and DCR, while laggards included: PGCL, LOTCHEM, TGL, THALL, and MTL.

Flow-wise, Foreigners topped the net sellers, offloading US$9.6 million followed by Mutual funds (US$7.1 million), Individuals (US$2.5 million), Insurance Companies (US$1.4 million) and NBFC (US$0.1 million). While Banks, Companies, Other organizations and Brokers were on the buying side, with a net buy of US$12.8 million, US$6.2 million, US$1.5 million, and US$0.2 million respectively.

With the rising policy rate amid political uncertainty, the market remains in a state of indecisiveness. Incoming news regarding delays in IMF was bound to invoke some gloom; the longer is the delay the more the uncertainty is going to influence the market, keeping volumes away.

The local currency has started paring some of the gains it had made recently, depreciating to PKR225/USD as the foreign exchange slips to critical levels despite restrictions on the opening of L/Cs.

With the winters approaching, inflation is expected to remain persistent. The market participants expect another cumulative rate hike of 200 bps in FY23.

Port of Savannah to become containers only facility

The Port of Savannah is upgrading to become a container-only facility to meet booming demand after a year-long increase in cargo volumes.

The port plans a US$410 million overhaul of one of its sprawling terminals to make room for loading and unloading larger ships while focusing its business almost exclusively on cargo shipped in containers.

The Georgia Ports Authority approved the project recently under a plan to expand Savannah's capacity for cargo containers by more than 50% by 2025.

"We're taking the Georgia ports from a Southeast gateway to a global gateway," said Griff Lynch, executive director of the Georgia Port Authority, which has seen over a decade of explosive growth at the state-owned seaports in Savannah and Brunswick.

Ocean Terminal will be converted to handling cargo in containers, from consumer electronics to frozen chicken by ship, train, or truck.

The terminal's berths will be upgraded with room to service two large ships simultaneously using eight new ship-to-shore cranes, at an additional cost of US$163 million.

Mass traffic jams off the West Coast caused shippers to divert cargo to Savannah and other ports along the East and Gulf Coasts. That resulted in Savannah handling a record 5.8 million teu of imports and exports across its docks in the 2022 fiscal year to June 30. That volume was just shy of Savannah's current capacity of 6 million teu.

The port authority's plan to add capacity for an additional 3 million teu by 2025 would give Savannah more room when the next cargo crush arrives. As Ocean Terminal undergoes its transformation, a newly expanded cargo berth will open in the summer at Savannah's main container terminal.

The expanded Ocean Terminal berths will be built in phases, with the first opening in 2025 and the second in 2026, Lynch said. He said converting an existing terminal to handle large container ships will be more efficient than building a brand new one, which would take up to five years.

Work will begin with rebuilding the docks to provide 850 m of berth space, capable of serving two ships simultaneously. 

Breakbulk cargo will shift to the Colonel’s Island terminal at the Port of Brunswick, which has historically focused on handling high-volume ro-ro shipments. 

The Port of Savannah, the US’ fourth-busiest container port, experienced a substantial increase in throughput in the post-pandemic era. In 2021, a boom year for containerized freight.

GPA moved about 10% of all US containerized cargo volume. The pace of growth continued this year. In August, the port handled 575,000 teu, an 18.5% increase compared to the same month in 2021. In October the port moved 553,000 teus, up 9.6% compared to the same month last year.

US shale oil output to grow at snail's pace

Oil output from the Permian shale basin in January is set to touch a record 5.6 million barrels per day (bpd), said US forecast on Monday, but the increase is a third of September's pace.

Output in the biggest US shale oil basin is set to rise by about 37,000 bpd, the smallest gain in seven months, based on projections from the US Energy Information Administration (EIA) in its monthly drilling productivity report.

Gains slowed as some of the largest firms are warning of overworked oilfields and less productive new wells.

Overall US output is forecast to reach a record 9.32 million bpd in January, according to the EIA, up only 94,500 bpd over the prior month. In August, the month-over-month increase was 207,500 bpd.

Legacy oil production change, which excludes output from new wells, will show steeper declines in all major shale producing regions in January. Production from new wells, defined as one that began producing for the first time in the previous month, also is expected to fall.

In the Bakken region of North Dakota and Montana, the EIA forecast oil output next month will rise 21,000 bpd to 1.22 million bpd, the largest total since November 2020.

In the Eagle Ford shale in South Texas, output will rise 10,000 bpd to 1.24 million bpd in January, its highest total volume since April 2020.

Natural gas production also is expected to grow by 535 million cubic feet per day to a record 96.28 billion cubic feet of gas per day. US gas production is rising sharply amid growing global need for the fuel.

In the biggest shale gas basin, Appalachia in Pennsylvania, Ohio and West Virginia, January output will rise to 35.53 bcfd, the highest since hitting a record 36 bcfd in December 2021.

Gas output in the Permian and the Haynesville field in Texas, Louisiana and Arkansas will rise to record highs of 21.39 bcfd and 16.41 bcfd in January, respectively.

EIA said producers drilled 1,005 wells in November, the most since March 2020. Total drilled-but-uncompleted (DUC) wells rose by 22 to 4,443 in November, the first monthly increase since June 2020

 

US to witness erosion in stockpiles due to pipeline outage and rig count decline

An outage of the largest oil pipeline to the United States from Canada could affect inventories at a key US storage hub and cut crude supplies to two oil refining centers, analysts and traders said on Friday.

TC Energy's Keystone pipeline ferries about 600,000 barrels of Canadian crude per day (bpd) to the United States. It was shut late Wednesday after a breach spewed more than 14,000 barrels of oil into a Kansas creek, making it the largest crude spill in the United States in nearly a decade.

The main question continues to be the duration of the potential outage. The longer the duration can potentially tighter inventories erosion of Cushing or heavy crude on the Gulf Coast," said Michael Tran, Managing Director at RBC Capital markets.

The line runs directly to the Cushing, Oklahoma, storage hub, which is currently about a third full with nearly 24 million barrels in stock.

If the outage last for more than 10 days, it could push Cushing storage to near the operational minimum of 20 million barrels, said AJ O'Donnell, Director at pipeline researcher East Daley Capital.

Volumes in the fourth quarter will be materially affected," as Keystone likely will run at a considerably lower pressure at least for some time once it restarts, said Harshit Gupta, Arc Independent research.

Other pipelines between Canada and the United States are at or near capacity, East Daley and data analytics firm Wood Mackenzie estimates.

"There's nowhere near enough to take 600,000 barrels a day. There's just not enough pipeline right now," O'Donnell said.

The spill in Kansas took place downstream from a key junction in Steele City, Nebraska, where Keystone splits to run into Illinois. That stretch of the line could be restarted, but the other segment affected by the spill will not come back until regulators approve a restart.

TC Energy aimed to restart on Saturday a pipeline segment that sends oil to Illinois, and another portion that brings oil to Cushing on December 20, Bloomberg reported, citing sources. TC Energy said it was evaluating plans to return the pipeline to service.

Volumes to the Gulf from Cushing have already dropped. Volumes on TC Energy's Marketlink pipeline, which flows from Cushing to Nederland, Texas, fell by about 300,000 bpd to less than 500,000 bpd, Wood Mackenzie estimates, after the leak was discovered.

Gulf Coast refiners, which could suffer shortages of heavy Canadian crude, can draw on supplies from offshore Louisiana facilities and from Colombia, Mexico and Ecuador.

US physical crude oil grade prices were mixed on Thursday and O'Donnell at East Daley said he expects volatility to continue as long as Keystone remained offline.

Meanwhile, a lengthy shutdown of the pipeline could lead to Canadian crude getting bottlenecked in Alberta, and drive prices lower, although the market's reaction on Friday was muted.

Western Canada Select (WCS), the benchmark Canadian heavy grade, for December delivery last traded at a discount of US$27.70 per barrel to the U.S crude futures benchmark, according to a Calgary-based broker. On Thursday, December WCS traded as low as US$33.50 under US crude, before settling at around a US$28.45 discount.

Rig Count

US energy firms this week cut the number of oil and natural gas rigs operating for the first time in six weeks as oil prices fell to their lowest this year.

The US oil and gas rig count, an early indicator of future output, fell by four to 780 in the week ended December 09, energy services firm Baker Hughes Co. said in its closely followed report on Friday. Oil rigs fell two to 625 this week, while gas rigs declined by two to 153, their lowest since July.

US oil futures were trading around US$71 a barrel on Friday, down about 6% so far this year, after topping US$130 in March after Russia's invasion of Ukraine.

US crude production was on track to rise from 11.25 million barrels per day (bpd) in 2021 to 11.87 million bpd in 2022 and 12.34 million bpd in 2023, according to federal energy data. That compares with a record 12.32 million bpd in 2019.