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Last Updated: March 6, 2020
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U.S. crude oil exports increased 45% to nearly 3 million b/d in 2019

U.S. crude oil exports averaged 2.98 million barrels per day (b/d) in 2019, an increase of 930,000 b/d (45%) from 2018 (Figure 1). The number of destinations for U.S. crude oil exports increased from 41 to 44, and Canada continued to receive the largest share (15%, or 459,000 b/d), followed by South Korea (14%, or 426,000 b/d). U.S. crude oil exports to China, the third-largest export destination in 2018, fell by nearly 100,000 b/d to average 133,000 b/d in 2019. Decreased U.S. crude oil exports to China were more than offset by increases to other destinations, resulting in shifting trade patterns. The growth in U.S. crude oil exports was driven by increasing U.S. crude oil production, expanding domestic infrastructure, and increased global demand for light, low-sulfur crude oils.

Figure 1. Annual U.S. crude oil exports (1920-2019)

Of the 15 top destinations for U.S. crude oil exports, 8 are in Asia and Oceania and 5 are in Europe. The eight destinations in Asia and Oceania represent 1.3 million b/d, or a 43% share of total U.S. crude oil exports in 2019, and the five destinations in Europe represent 779,000 b/d, or a 26% share (Figure 2).

Figure 2. 2019 U.S. crude oil export destinations

China dropped from the third-largest destination for U.S. crude oil exports in 2018 to the seventh-largest in 2019. In the summer of 2018, trade negotiations between the United States and China and unfavorable prices led China to reduce imports of U.S. crude oil, which continued into 2019. In the first-half of 2018, the United States exported 389,000 b/d of crude oil to China, which made China the largest destination for U.S. crude oil exports during that period. However, in the second half of 2018, the United States exported just 77,000 b/d on average of crude oil to China. In 2019, China received an average of 133,000 b/d of U.S. crude oil exports compared with 232,000 b/d in full-year 2018.

Although exports to China declined, U.S. crude oil exports to other destinations increased, most notably to South Korea, the Netherlands, and India. In 2019, U.S. exports of crude oil (Figure 3)

  • To South Korea rose from 242,000 b/d in 2018 to 426,000 b/d, an increase of 184,000 b/d (76%)
  • To the Netherlands more than doubled from 132,000 b/d in 2018 to 281,000 b/d, an increase of 149,000 b/d (113%)
  • To India increased by more than 100,000 b/d (69%)

Figure 3. Change in U.S. crude oil export destinations (2018-19)

Increased U.S. crude oil production, which rose 1.24 million b/d in 2019 (11%) over the previous year, allowed for greater volumes of U.S. crude oil exports. The increased production is mostly of light, sweet crude oils, but U.S. Gulf Coast refineries are complex and largely optimized to process heavy, sour crude oils. Higher crude oil production and a mismatch between crude oil type and refinery configuration increases the availability of U.S. crude oil production for exports.

Another factor enabling increased U.S. crude oil exports has been the completion of pipeline capacity from producing regions such as the Permian in West Texas to the U.S. Gulf Coast. According to the U.S. Energy Information Administration’s (EIA) liquids pipeline project database, about 2.8 million b/d of additional pipeline capacity was scheduled to be completed in 2019 in Texas alone.

In addition, the lead-up to the 2020 International Maritime Organization (IMO) marine fuel sulfur regulation likely contributed to increased demand for U.S. crude oil by global refineries, particularly in South Korea and the Netherlands. Increasing the amount of light, sweet crude oils that a refinery processes is one way to increase the production of IMO-compliant low-sulfur marine fuels and minimize the production of residual fuel oil. Although details on the exact gravity and sulfur content of U.S. crude oil exports is not collected in a way that allows specific grade distinctions by official U.S. Customs and Border Protection export forms (on which EIA exports data are based), most U.S. crude oil exports are likely light and low in sulfur content. This characteristic made U.S. crude oil exports attractive to many refiners as they prepared for IMO 2020 in the latter half of 2019.

U.S. average regular gasoline and diesel prices fall

The U.S. average regular gasoline retail price fell more than 4 cents from the previous week to $2.42 per gallon on March 2, less than one cent higher than a year ago. The Midwest price declined nearly 6 cents to $2.30 per gallon, the East Coast price declined nearly 5 cents to $2.35 per gallon, the Gulf Coast price fell nearly 4 cents to $2.11 per gallon, the Rocky Mountain price declined more than 2 cents to $2.42 per gallon, and the West Coast price fell nearly 1 cent to $3.13 per gallon.

The U.S. average diesel fuel price fell more than 3 cents from the previous week to $2.85 per gallon on March 2, 23 cents lower than a year ago. The West Coast price fell nearly 4 cents to $3.42 per gallon, the East Coast and Midwest prices each fell more than 3 cents to $2.90 per gallon and $2.73 per gallon, respectively, the Gulf Coast price fell nearly 3 cents to $2.63 per gallon, and the Rocky Mountain price fell more than 2 cents to $2.83 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 3.6 million barrels last week to 70.0 million barrels as of February 28, 2020, 18.8 million barrels (36.7%) greater than the five-year (2015-19) average inventory levels for this same time of year. Gulf Coast inventories decreased by 1.6 million barrels, Midwest inventories decreased by 1.5 million barrels, and East Coast and Rocky Mountain/West Coast inventories each decreased by 0.3 million barrels. Propylene non-fuel-use inventories represented 7.7% of total propane/propylene inventories.

Residential heating fuel prices decrease

As of March 2, 2020, residential heating oil prices averaged more than $2.82 per gallon, nearly 7 cents per gallon below last week’s price and almost 41 cents per gallon lower than last year’s price at this time. Wholesale heating oil prices averaged nearly $1.61 per gallon, more than 18 cents per gallon below last week’s price and almost 53 cents per gallon lower than a year ago.

Residential propane prices averaged nearly $1.97 per gallon, more than 1 cent per gallon below last week’s price and more than 45 cents per gallon below last year’s price. Wholesale propane prices averaged nearly $0.57 per gallon, more than 3 cents per gallon lower than last week’s price and almost 26 cents per gallon below last year’s price.

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Chicago Cubs Shirts: Wear Style with Ultimate Comfort!

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The New Wave of Renewable Fuels

In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.

Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.

Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.

This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.

But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.

In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.

But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.

Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.

Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.

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Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • Global crude benchmarks have stayed steady, even as OPEC+ sticks to its plans to ease supply quotas against the uncertainty of rising Covid-19 cases worldwide
  • However, the success of vaccination drives has kindled hope that the effect of lockdowns – if any – will be mild, with pockets of demand resurgence in Europe; in China, where there has been a zero-tolerance drive to stamp out Covid outbreaks, fuel consumption is strengthening again, possibly tightening fuel balances in Q4
  • Meanwhile, much of the US Gulf of Mexico crude production remains hampered by the effects of Hurricane Ida, providing a counter-balance on the supply side

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