U.S. Crude Oil Exports: When ‘Less is More’
Longer sailing distances cushion fall in US crude oil exports
Ton mile demand generated by US crude oil exports has fallen by 9.7% in the first two months of 2021 compared with the start of 2020. The fall could however have been much worse; In volume terms, seaborne crude oil exports have fallen by 18.8%, to 20.9m tonnes, a 4.8m tonnes decline compared with last year, according to data from the US Census Bureau.
While seaborne crude oil exports to all regions have fallen, those to Asia are among the least affected, down just 1.0%, or equivalent to one Aframax load (101,088 tonnes). As sailing distances to Asia are much longer than those to the rest of the world, the smaller drop in exports to these countries explains why exports have fallen less when measuring seaborne shipping demand in tonne-miles than measured in tonnes.
The average sailing distance covered by a tonne of US crude oil exported to Asia has so far this year been 12,531 nautical miles. This is almost three times as high as the average sailing distance of exports to the rest of the world which stands at 4,490 nautical miles.
This analysis takes a look at the developments in US crude oil trade as well as in domestic consumption and production, and how these will affect the tanker shipping industry.
China and India keeping exports to Asia stable
Looking closer at exports to Asia, only three countries have seen higher imports this year than last, and only two of them have seen meaningful growth: China and India. In the first two months of 2020, the US didn’t export any crude oil to China, only to see its exports grow during the rest of the year and end up by 22.1% compared to 2019. Growth has continued this year with US crude oil exports totalling 2.5m tonnes in the first two months (13 200,000 tonne VLCC loads).
The 0.9m tonnes of crude oil exported to China in February was the lowest monthly export since April 2020, and significantly down from the 2.8m tonnes exported in December 2020 which was behind a steep rise in total US exports that month.
There have also been higher US crude exports to India, up 75.8% from the start of 2020, with a 1.5m tonne increase, meaning that in the first two months of 2021, the US has exported 3.5m tonnes of crude oil to India. Excluding exports to India and China, exports to Asia has fallen by 45.8% to 3.8 million tonnes, with exports to South Korea alone falling by 1.3m tonnes compared to the start of 2020.
“Geopolitics are part of the reason behind the strong growth in exports to China and India while exports to the rest of the world are falling. Since the second quarter of 2020, China has been buying US crude oil as part of the Phase One agreement between the two countries, but remains far behind the targets that were set out,” says BIMCO’s Chief Shipping Analyst, Peter Sand.
“India on the other hand is looking to diversify its imports of crude oil to become less dependent on the OPEC+ alliance in a move that reflects India’s dissatisfaction with the Saudi-led crude oil supply cuts,” Sand says.
“Whatever the reasons, higher imports from the US to China and India, especially if they replace Middle Eastern crude oil, are great for tanker shipping demand,” Sand adds.
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