U.S. Crude Oil Export Gains Expected to Plateau in 2024

By Arathy Somasekhar

HOUSTON (Reuters) – U.S. crude oil export gains should plateau in 2024 after years of strong growth, with domestic output expected to increase by the smallest amount since the pandemic at a time when global oil demand remains sluggish.

Crude oil exports from U.S. ports averaged about 4.2 million barrels per day so far this year, according to U.S. government data. This figure represents a 3.5% increase from a year earlier, the lowest percentage rise since 2015 when the U.S. exported its first cargo of domestic crude oil after the end of a 40-year federal ban on exports.

Last year, exports grew by 13.5%. They have consistently increased each year except in 2021 when COVID-19 severely impacted global oil demand.

“U.S. crude exports are plateauing due to a combination of slowing supply growth and easing demand – particularly from Asia this year,” said Matt Smith, an analyst at energy data firm Kpler.

U.S. oil production is set to grow just 2.3% this year as shale producers prioritize shareholder returns and limit new spending on production. Offshore production is expected to rise due to new project startups, such as Chevron’s Anchor platform in the Gulf of Mexico. However, this output will ramp up slowly over several years, so exports in the current year will not see significant benefits.

Global demand for oil has slowed, especially in China, where ongoing property downturns have heightened economic concerns. U.S. daily crude oil exports to China have decreased by over a third this year, according to Kpler data.

Additionally, the recent expansion of Canada’s Trans Mountain pipeline has enabled increased imports of crude directly from Canada to China, previously transported to the U.S. Gulf Coast for export.

U.S. export volumes to Singapore have also dropped, while exports to India and South Korea have increased. “Asia demand has not materialized,” noted Rohit Rathod, market analyst at energy researcher Vortexa.

Daily U.S. exports to Europe have seen a slight decline of about 1% this year, as European buyers opt for cheaper regional and West African oil.

The only significant new market for U.S. crude has been Africa, where Nigeria’s Dangote refinery has begun purchasing barrels of WTI Midland crude after its startup this year. “Dangote is an outlier when it comes to new refining capacity, in that it is running on predominantly light sweet crude – from Nigeria or the U.S.,” said Kpler’s Smith.

Smith further explained, “New refining capacity is being built predominantly in OPEC+ countries or Asia, where light and medium sour barrels are more common.”

U.S. export volumes may receive a boost in the upcoming weeks due to production constraints in Libya and elsewhere. As U.S. refiners begin maintenance, more domestic barrels may be made available for export.

Refiners that typically import light sweet crude could potentially substitute Libya’s Sharara with U.S. WTI Midland and other grades, as trade sources have indicated, particularly after Libya’s National Oil Corporation declared force majeure on the Sharara field from Aug. 7.