11th June 2010 - USA: Another Change?
Less than a year ago long-haul crude tanker trade into the US suffered severe damage on the back of the rapidly changing dynamics of the US oil industry. Oil demand was down, refinery throughput was down and at the same time domestic crude production was increasing. Last year US oil consumption averaged 18.7 million b/d, down by 0.8 million b/d year-on-year and down by 2 million b/d compared to 2007 (Source: EIA). Similarly, average annual crude refinery throughput declined by almost 1 million b/d between 2007 and 2009 to 14.3 million b/d. Domestic crude production increased over the same period by 250,000 b/d to 5.3 million b/d. Of course, all of the above factors combined had a massive knock down effect on crude imports into the country, which dropped from 10 million b/d in 2007 to just under 9.1 million b/d in 2009. Half of this decline came from the long-haul Middle East trade and a third of the drop was attributable to West African imports.
However, in the past couple of months crude imports into the world's largest oil consumer have started to recover, with the average for the past four weeks at 9.7 million b/d, up from 7.9 million b/d at the beginning of the year. This is because oil demand has been clearly edging up lately, breaking the 20 million b/d mark in the week ending May 28th and US refinery throughput moved up as a consequence, averaging 15.1 million b/d in the past four weeks. The focus is now on US crude production, with huge uncertainty about the development work in the US Gulf in light of the recent oil spill disaster. Before the incident, US crude output was forecast to rise by 0.5 million b/d over the next 5 years, mainly due to the US Gulf deepwater developments. Now short-term production forecasts have already been downgraded by around 100-150,000 b/d amid recently imposed six month ban on deepwater drilling. In addition, if the ban is extended, losses to domestic crude output will be far greater.
The implication is that in the short term we will see more long-haul trade to the US and, if the US administration's view of the offshore oil exploration remains "inhospitable" to say the least, there will be bigger gains in the long-haul VLCC trade to the US. Also, the question remains what effect the Deepwater Horizon accident will have on the global offshore industry and the pace of new developments. However, this is another story...
