US OIL PRODUCERS EXPANDING MARKET SHARE ON TO ASIA

The US shale oil industry’s first battle with OPEC was on American soil, and as we reported the US won and OPEC is not in control of price anymore. US Domestic crude production forced cartel members such as Saudi Arabia to seek new buyers in Asia. However, revealing of the current situation world’s oil traders are gathering in Singapore for the Asia Pacific Petroleum Conference (https://10times.com/appec) US producers are coming in high numbers and the US presence is massive. APPEC say more US oil producers, traders and energy services companies are coming to Singapore.

Resurgent US shale output is in pursuit of new customers.

Asia is a premium market for crude oil so no surprise. The lifting of the 40-year-old restrictions on US crude exports in late 2015 kick-started the trend and, with production now rebounding the US producers are aggressive. In addition, with crude climbing back above $50 a barrel, more companies are looking abroad to expand market share. US crude production is now 9.3m barrels a day, exports of crude is surging. China, Japan and South Korea are the largest importer which is a six-fold jump from total 2016 exports to Asia according to Clipper-data.

US crude is cheaper than European Brent and the gap has now reached $5.80 per barrel discount largest gap in in two years. Chinese are known for being shrewd traders so the difference in price is clearly to the advantage to the US combined with a weak dollar it is a “no brainer” for Asian buyers.

OPEC remains still the largest supplier to the Asian market but this aggressive move by the US suppliers must certainly disturb The Kingdom and OPEC, especially as China, will overtake the US as the world’s biggest oil importer this year and accounts for almost 60 per cent of this year’s US exports to Asia.

The recent declaration by President Donald Trump against “countries that have big trade deficits with the US” is certainly helping as China does not want a frontal confrontation with the USA. The trade deficit with China was $347bn in 2016 and the new Trump Administration wants to see it lower.

As US companies are courting Asian buyers, traditional OPEC suppliers lead by Saudi Arabia’s ARAMCO and Kuwait are hosting parties of their own and watching closely the US contingent. State-owned Saudi Arabian Oil Co, known as Saudi Aramco, recently increased its official pricing for Arab Light crude to Asia by 55 cents to 30 cents a barrel more than the regional benchmark. The company had been expected to raise pricing but that number was a surprise. The increase is indicative of strength in the Asian market so much to make the Texas and Bakken Crude more attractive.

OPEC countries were expecting the impact of Harvey to be longer but it is without knowing the pugnacity of US producers and refiners!

Refinery outages began in Texas as early as August 24up until August 30. At the peak on August 30, more than 3.7mn bpd of primary processing refining capacity was offline, with troubles spanning from Corpus Christi, TX, Houston, and Port Arthur, TX. In September Refinery units have gradually returned to service. However, 1.17mn bpd of primary processing capacity remained offline as of September 20. All monitored units at Corpus Christi refineries had returned to service at that time, while restarts continued in Houston and Port Arthur. In total, more than 40mn bbl. of crude could have been run during the refinery shut-ins, based on crude distillation unit outages.

In the meantime, Louisiana refineries were spared from Harvey’s path of destruction. Additionally, most of the oil facilities in southeast Louisiana are located in 500-year floodplains, which have a 0.2 percent chance of flood hazard, according to FEMA.

So, war with OPEC is still on and US Oil producers are clearly aggressive to tap into new markets!