Photo: Oil barrels (illustration); Source: Equinor

U.S. Gulf Coast oil exports to hit all-time high levels this quarter, Rystad says

Despite the domestic supply shortage, Rystad Energy, an energy intelligence group, has revealed that oil exports from the U.S. Gulf Coast are positioned to reach the highest level in the second quarter of 2022, in the wake of the current geopolitical crisis, which has led to increased energy security concerns.

According to Rystad’s report from last week, oil exports from the U.S. Gulf Coast are set to hit a record high of 3.3 million barrels per day (bpd) this quarter, as refining capacity outages limit operators’ ability to meet demand and the U.S. government’s Strategic Petroleum Reserve (SPR) release boosts supply. The company’s research highlights that more than 95 per cent of all US crude exports transit through the Gulf ports of Corpus Christi, Houston, Beaumont, Port Arthur and Louisiana.

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Rystad Energy research shows that the Biden Administration is exploring ways to rein in gasoline prices for U.S. consumers and is reportedly considering a full or partial ban on crude exports, but many industry leaders and politicians argue such a move would not necessarily reduce prices and would hurt key allies.

According to the energy intelligence firm, the government’s unprecedented support for the domestic crude system has accelerated the U.S. supply, with levels expected to hit 13 million bpd this summer for the first time since November 2019. However, the unintended consequence of federal intervention is that more barrels than ever before are being sold to international buyers.

Furthermore, crude exports through Gulf Coast ports are expected to top 3.3 million bpd in the second quarter of this year, exceeding the previous record of 3.2 million bpd in the first quarter of 2020, before the Covid-19 pandemic took its toll on global markets, as explained by Rystad.

The energy intelligence provider points out that Port of Corpus Christi is a significant driver of the growth, with throughput increasing by more than 150,000 bpd to reach 1.86 million bpd, up from a total 1.7 million in the first quarter of 2022, far surpassing pre-Covid levels. In addition, Port of Houston exports have been rising since the third quarter of last year, but still fall short of their pre-pandemic levels.

Source: Rystad Energy
Source: Rystad Energy

Artem Abramov, head of shale research at Rystad Energy, remarked: “Domestic refining capacity in the U.S. remains depressed compared to pre-Covid levels, so it’s no surprise that government intervention to support crude supplies has resulted in an increase in exports of domestically produced light barrels. It means the U.S. is able to support global markets amid the most challenging energy crisis in at least 30 years.”

Based on Rystad Energy’s research, the U.S. Gulf oil exports stayed relatively resilient throughout the Covid-induced downturn, generally fluctuating between 2.7 million and 3.1 million bpd. Moreover, the new growth trend was established in late 2021 following a domestic supply recovery and support given to domestic consumption from a moderate SPR release, outlines the energy intelligence firm.

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For Rystad Energy, the future looks bright for Gulf Coast exports, with volumes transiting through the hubs of Corpus Christi, Houston and Beaumont, Port Arthur and Louisiana expected to accelerate in the coming years. In lieu of this, crude exports will approach 4 million bpd in the first three months of 2023 and break the 4 million bpd barrier by the second quarter of 2023, thanks to strong SPR draws and a rosy domestic supply outlook, as presented under Rystad Energy’s base case scenario.

While Rystad states that a quicker expansion is not off the cards from the perspective of loading and port inbound flow capacity, the firm elaborates that the growth outlook could be tempered by bottlenecks in the upstream and basin midstream side, including the new public E&P business model, supply chain constraints, and schedules for gas takeaway capacity expansion in the Permian Basin.

Courtesy of Rystad Energy
Courtesy of Rystad Energy

The energy intelligence provider further adds that the likelihood of soaring exports could be deemed unrealistic as there is little that the nationwide U.S. supply chain can do to resolve existing labour and capacity challenges faster. In spite of this, Rystad believes that if supply chain challenges alleviate even somewhat in the first half of 2023, exports could rise beyond current forecasts.