U.S.: 401,000 BBL/D
Crude exports and re-exports continue to rise; some volumes sent to Europe and Asia
The United States exported 401,000 barrels per day (bbl/d) of crude oil in July 2014 (the latest data available from the U.S. Census Bureau), the highest level of exports in 57 years (Figure 1) and the second highest monthly export volume since 1920, when EIA's published data starts. Recent crude oil exports are also noteworthy for both their origins and destinations. Typically, crude exports are sourced domestically and are sent only to Canada. However, since April, crude exports have included modest amounts of Canadian-produced barrels that were moved through the United States and re-exported to Switzerland, Spain, Italy, and Singapore (Figure 2).
To export crude oil from the United States, a company must obtain a license from the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. Pursuant to Section 754.2 of the BIS export Administration Regulations which codifies the export licensing requirements, the following kinds of transactions will generally be approved: exports from Alaska's Cook Inlet; exports to Canada for consumption or use therein; exports in connection with the refining or exchange of strategic petroleum reserve oil; exports that are consistent with international energy supply agreements; exports of foreign-origin crude; exports of California Heavy crude up to an average of 25,000 bbl/d; and temporary exports or exchanges. Licenses for other exports of U.S.-origin crude are considered on a case-by-case basis. For such other exports, the regulations describe the characteristics of transactions that will generally be approved as in the national interest.
Separate legislation passed in 1996 permits the export of Alaska North Slope (ANS) crude oil. The recent shipments to Switzerland, Spain, Singapore, and Italy were small volumes of permitted re-exports of Canadian crude oil that were not commingled with U.S.-produced barrels.
As is the case in the United States, some of the growth in Canada's crude oil production is taking place in areas with limited infrastructure to bring the crude to refineries for processing. With limited pipeline and rail takeaway capacity, some Canadian producers are testing the economic viability of moving crude oil to the Gulf Coast for re-export to other markets.
It is unclear if this recent trend of Canadian re-exports from the Gulf Coast will continue, and if so, for how long. Several proposed Canadian pipeline projects may provide producers with alternative routes for delivering crude to markets beyond North America, but the timing of each of them is uncertain (Figure 3). Enbridge Inc.'s Line 9 reversal project is in its second phase, which is expected to be in service next month. The first phase, which began eastward flows earlier this year, currently enables shipment of crude from Sarnia, Ontario, to North Westover, Ontario. When completed, the second phase will expand capacity to 300,000 bbl/d and continue on from North Westover to Montreal, Quebec, where the crude could access refineries in Montreal or global markets via the St. Lawrence Seaway.
A separate project proposed by TransCanada, called Energy East, would move 1.1 million bbl/d from Alberta and Saskatchewan to refineries in eastern Canada. This plan includes conversion of an existing natural gas line to crude service and construction of new pipe on both the gathering and terminal ends. The company submitted a project description to Canada’s National Energy Board in March but has yet to file an official application, meaning this project is several years away from being operational. Additionally, both TransCanada and Kinder Morgan are seeking approval for projects that would carry barrels from Alberta west to the Pacific Coast in British Columbia. But both of those projects face resistance along the pipeline siting routes, so the outcome of these options remains to be seen.
Another development in U.S. crude oil exports is the recent shipment of Alaska North Slope (ANS) crude to South Korea, the first export of ANS in more than 10 years. ANS barrels were loaded for export in late September and delivered earlier this month. ANS shipments abroad must use U.S. coastwise-compliant ships for transport, and market analysts estimate that ANS would need to trade at a discount of $5/bbl to Brent to make such a movement economical. Although Alaskan crude production has recently been declining, the recent retirement of the remaining 79,000 barrels per calendar day of crude distillation unit capacity at the Flint Hills refinery in North Pole, Alaska, which had been running ANS crude, means that ANS producers may consider sending additional volumes to export markets.
GASOLINE PRICES FALL TO LOWEST LEVEL SINCE 2011, DIESEL FUEL PRICES DECREASE
The U.S. average price for regular gasoline fell nine cents from the previous week to $3.12 per gallon as of October 20, 2014, 24 cents lower than the same time last year, and the lowest average price since January 31, 2011. The West Coast had the largest decrease, down 11 cents to $3.42 per gallon. The East Coast and Gulf Coast prices were each down 10 cents, to $3.13 per gallon and $2.91 per gallon, respectively. The Rocky Mountain price decreased nine cents to $3.25 per gallon, and the Midwest price fell six cents to $3.03 per gallon.
The U.S. average diesel fuel price decreased four cents to $3.66 per gallon, down 23 cents from the same time last year. The biggest price decline was on the West Coast, down six cents to $3.84 per gallon. The East Coast and Gulf Coast each fell five cents, to $3.67 per gallon and $3.59 per gallon, respectively. The Midwest decreased three cents to $3.61 per gallon, and the Rocky Mountain price fell a penny to $3.74 per gallon.
PROPANE INVENTORIES RISE
U.S. propane stocks increased by 0.2 million barrels last week to 81.6 million barrels as of October 17, 2014, 15.6 million barrels (23.7%) higher than a year ago. Gulf Coast inventories increased by 0.2 million barrels and East Coast inventories increased by 0.1 million barrels. Rocky Mountain/West Coast inventories remained unchanged while Midwest inventories decreased by 0.2 million barrels. Propylene non-fuel-use inventories represented 2.8% of total propane inventories.
RESIDENTIAL HEATING OIL AND PROPANE PRICES DECREASE
As of October 20, 2014, residential heating oil prices averaged $3.48 per gallon, almost 5 cents per gallon lower than last week, and 38 cents less than last year's price of $3.86. Wholesale heating oil prices averaged nearly $2.65 per gallon, 2 cents per gallon lower than last week and nearly 46 cents lower when compared to the same time last year.
Residential propane prices decreased by less than one cent last week to $2.37 per gallon, half a cent less than the price at the same time last year. Wholesale propane prices averaged nearly $1.08 per gallon, 4 cents lower than last week's price and just under 20 cents per gallon lower than the October 21, 2013 price.
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ARAB NEWS - Saudi's Aramco Trading Company (ATC) expects to increase its oil trading volume to 6 million barrels per day (bpd) in 2020, 50 percent higher than current levels, the company's top official said on Monday.
BAKER HUGHES A GE - U.S. Rig Count is down 2 rigs from last week to 1,053, with oil rigs down 1 to 866, gas rigs unchanged at 186, and miscellaneous rigs down 1 to 1. Canada Rig Count is down 29 rigs from last week to 197, with oil rigs down 13 to 135 and gas rigs down 16 to 62.
REUTERS - International benchmark Brent crude for November delivery LCOc1 was up 26 cents, or 0.33 percent, at $78.96 a barrel by 0647 GMT. U.S. West Texas Intermediate crude for October delivery CLc1 was up 7 cents, or 0.10 percent, at $70.39 a barrel.
BLOOMBERG - Russia's oil output is currently fluctuating between 1.54 million and 1.55 million tons a day -- driven mainly by state-run giant Rosneft PJSC -- the official said, asking not to be named as the information isn’t public yet. That equates to 11.29 million to 11.36 million barrels a day, beating the previous record of 11.25 million barrels a day set in October 2016 before Russia agreed with the Organization of Petroleum Exporting Countries to cut production.