The crude oil markets were thrown into a tizzy recently when Bloomberg claimed that the USA had become a net oil exporter for the first time in 75 years. Some market observers pounced on the news, claiming that is was misleading and far from the truth. Others proclaimed it as a show of strength of the American oil industry.
Were both sides correct? Depends on how you interpret the numbers. So lets us break it down.
Surging American production from prolific onshore shale fields have pushed US crude production to record highs, becoming the largest oil producer in the world, ahead of Saudi Arabia and Russia. For the last week of November 2018, the American Energy Information Administration (EIA) reported that US crude output hit a new high of 11.7 mmb/d, up almost 2 mmb/d year-on-year. That this number is surging is surprising to no one, but in the same report, the EIA also showed that the number of oil products supplied to the market – a proxy for crude oil consumption – as 20.5 mmb/d. That’s a gap of 8.8 mmb/d. Add in Other Supply of 6.9 mmb/d – which includes NGLs, fuel ethanol and also refinery processing gains when crude oil gets cracked into a larger amount of fuels – and the gap between oil supply and oil demand is still 1.9 mmb/d. The USA is by no means energy independent yet.
So was Bloomberg wrong? No, but it certainly was being slightly disingenuous. To achieve Bloomberg’s assertion, we have to look at net trade. For the same period, the USA managed to export 3.2 mmb/d - a significant number considering that America’s crude oil export ban was only lifted in 2015 – but imported 7.2 mmb/d of crude. That’s a net import position of 4.0 mmb/d. On the products side, the US exported 5.8 mmb/d of finished products (including gasoline, naphtha, petrochemicals, ethanol and NGLs) while importing some 1.6 mmb/d. That’s a net export position of 4.2 mmb/d.
The comparison of those two net trade numbers could be construed that the US has became a net exporter of 0.2 mmb/d of crude and finished products for the week. This is actually the first time that this number has been in net export since the EIA began reporting in 1991, compared to 2005 when the net import position was at an all-time high of 14.4 mmb/d. But is it correct to conclude that the US is a net exporter of oil from this? Only from one mathematical perspective. For any other direction, the US is still a net importer of 4 mmb/d of crude oil or in a net deficit of oil supply by 1.9 mmb/d.
But misleading or not, though, this is still a major change from even 3 years ago, when the US was a net importer of 9 mmb/d of crude oil or had a net deficit of oil supply of almost 7 mmb/d. And if trends continue to hold, even those numbers could flip soon. Maybe not so soon, but by 2020, they could narrow even further and flip into surplus. Bloomberg’s headline might have been delusive, but the numbers are correct and the trends are clear – the headline is less an assertion and more of a prediction based on very concrete trends.
EIA numbers as of 30 November 2018:
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