OPEC giving up US market share

Aug 23, 2017 1:35:51 PM EST

Oil prices are rallying post-EIA report as today's crude draw was joined by a drop in gasoline inventories. Although waterborne imports were strong last week, OPEC flows to the U.S. continue to ebb. Hark, here are some things to consider in oil markets today:

Last week we discussed how the share of OPEC crude heading into Asia was on the wane, as other exporters were muscling in on the cartel's market share amid the OPEC production cut deal and rising demand. Switching our focus to the U.S., we can see that a similar trend has been underway in recent months, as deliveries from key suppliers such as Saudi Arabia drop - despite rising flows from others such as Angola and Libya.

After accounting for as much as 72 percent of U.S. waterborne deliveries in March, OPEC deliveries last month dropped to 65 percent, and are tracking even lower so far in August.

OPEC crude exports to the US ClipperData.jpg

Even though U.S. production continues to rise, waterborne imports are also on the ascent, as U.S. refineries run at a record pace for the time of year, demanding more crude. Flows into the U.S. from non-OPEC members such as Brazil and Colombia have risen in recent months, providing much-needed heavier grades. Supplies have also been kicking higher from the likes of Norway and Russia. 

US imports of nonOPEC crude.jpg

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After today's EIA inventory report, total U.S. gasoline inventories are 2.8 million barrels below last year's levels. Gulf Coast inventories are 3.8mn bbls above year-ago levels, in itself the five-year high, because exports are unable to keep up with higher refinery runs. But it is Atlantic Coast inventories which are keeping total stocks in check, some 6mn bbls below year-ago levels.

Atlantic Coast gasoline inventories are lower because US importers have been much more disciplined this summer, dialing back on imports from Northwest Europe to avoid a repeat of the supply glut seen last year:

US Atlantic Coast gasoline imports from Northwest Europe ClipperData.jpg

Finally, the chart below from the IEA shows OECD electricity generation by source. Preliminary data for 2016 indicate that natural gas has finally eclipsed coal in the OECD generation mix, after the two have been gradually converging over the last two decades. 

Nonetheless, fossil fuel electricity production has actually dropped in the OECD in 2016 for a fourth consecutive year, although natural gas rose by 5.8 percent. On the flip side, renewables continue to show strong growth, with solar power up 19.2 percent  and wind power up 7.7 percent last year:

OECD electricity generation.jpg

About the Author

Matt Smith

deciphers and distills what is most relevant across the energy complex into cohesive and pithy knowledge you can use. The belly laugh is a bonus.

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