A Massive Tanker Speaks Volumes About American Crude Oil Exports

By Richard Murphy, Product Manager

Something historic recently happened along the Texas coast: Anne, the Euronav-owned VLCC crude oil tanker, tested the waters by the Occidental Ingleside Energy Center Terminal at the Port of Corpus Christi. Anne, the largest tanker to dock in a Gulf of Mexico port to date, is capable of carrying around 2 million barrels of crude oil.

VLCC Anne, photo courtesy of Euronav NV website What makes this event particularly notable is that it demonstrates the push under way by the U.S. to become a major crude exporter, a status it hasn’t held for decades. Even though the U.S. currently consumes more oil than it produces, it’s now exporting significant volumes of crude, much of which is light, low-sulfur crude from the Permian Basin. Because U.S. refineries are optimized for heavy, high-sulfur crude, it’s actually more economical to sell the oil to refineries in Asia and other countries that are optimized for light, sweet crude than it is to refine and sell the output domestically.

Additionally, as tanker sizes being handled by U.S. ports increase, it will make American exports even more competitive. Houston has traditionally been the port of choice for both imports and exports, though Corpus Christi is expanding, and the Anne’s trip signals the potential for further growth. While Anne’s visit is only the beginning, it shows that domestic producers have to be prepared – both for shipping greater volumes outside the country to meet global demand and for dealing with the new complexities this will bring.

In February of this year, U.S. crude oil exports exceeded 1 million Bbls a day, making it the world’s 13th-largest exporter of crude oil. With the increases in shale oil production, U.S. volume could possibly double in the next few years. Conceivably, the U.S. could vault higher and find itself on par with Kuwait and Nigeria in terms of total exports.

Exports of this level will present considerable challenges to an industry with systems designed for a time in which crude wasn’t exported from domestic fields and flows were always assumed to be toward Gulf Coast refineries. The change, which is still in its early stages, will have an enormous impact on crude marketing strategies, as well as the associated trading and hedging.

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