Wednesday, July 18, 2012

How dependent is U.S. on foreign oil?



The United States relied on net imports (imports minus exports) for about 45% of the petroleum (crude oil and petroleum products) that we consumed in 2011. Just over half of these imports came from the Western Hemisphere. Our dependence on foreign petroleum has declined since peaking in 2005. 

U.S. imports domestic petroleum shares demand

The United States consumed 18.8 million barrels per day (MMbd) of petroleum products during 2011, making us the world's largest petroleum consumer. The United States was third in crude oil production at 5.7 MMbd. But crude oil alone does not constitute all U.S. petroleum supplies. Significant gains occur, because crude oil expands in the refining process, liquid fuel is captured in the processing of natural gas, and we have other sources of liquid fuel, including biofuels. These additional supplies totaled 4.6 MMbd in 2011.

The United States imported 11.4 MMbd of crude oil and refined petroleum products in 2011. We also exported 2.9 MMbd of crude oil and petroleum products, so our net imports (imports minus exports) equaled 8.4 MMbd.

sources of U.S. NEt Petroleum Imports 2011


In 2011, the United States imported 2.4 MMbd of petroleum products such as gasoline, diesel fuel, heating oil, jet fuel, and other products while exporting 2.9 MMbd of products, making the United States a net exporter of petroleum products.
Over Half of U.S. Petroleum Imports Come from the Western Hemisphere

Some may be surprised to learn that 52% of U.S. crude oil and petroleum products imports came from the Western Hemisphere (North, South, and Central America, and the Caribbean including U.S. territories) during 2011. About 22% of our imports of crude oil and petroleum products came from the Persian Gulf countries of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates. Our largest sources of net crude oil and petroleum product imports were Canada and Saudi Arabia.

U.S. net petroleum imports 1949 2011


Top Sources of Net Crude Oil and Petroleum Product Imports:
  • Canada (29%)
  • Saudi Arabia (14%)
  • Venezuela (11%)
  • Nigeria (10%)
  • Mexico (8%)

It is usually impossible to tell whether the petroleum products you use came from domestic or imported sources of oil once they are refined.
Reliance on Petroleum Imports has Declined

U.S. dependence on imported oil has declined since peaking in 2005. This trend is the result of a variety of factors including a decline in consumption and shifts in supply patterns.1 The economic downturn after the financial crisis of 2008, improvements in efficiency, changes in consumer behavior and patterns of economic growth, all contributed to the decline in petroleum consumption. At the same time, increased use of domestic biofuels (ethanol and biodiesel), and strong gains in domestic production of crude oil and natural gas plant liquids expanded domestic supplies and reduced the need for imports.

Friday, July 13, 2012

Bakken formation causes Wti Spread to increase



Since the mid-1980s, benchmark crude oil prices such as West Texas Intermediate (WTI) in the United States and Brent crude oil in Europe have served as reference points that the market uses for pricing other crude oils. Since late 2010, however, WTI has been selling at a large discount to Brent, and has become less useful as an indicator for U.S. petroleum product prices. Beginning with the July 2012 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) will supplement its traditional WTI and average refiner acquisition cost (RAC) forecasts with a forecast of the Brent crude oil spot price that will directly enter into price forecasts for gasoline and other refined products in the STEO (see Brent Crude Oil Spot Price Added to Forecast). EIA currently expects the Brent crude oil price will average $99 per barrel over the second half of 2012 and $98 per barrel in 2013.

Until 2008, all North American crude oil grades broadly tracked fluctuations in the WTI price and were clustered within about $8 per barrel of the WTI spot price (Today in Energy, June 21, 2012). Pricing differences between crude oil grades were explained largely by the different quality characteristics of the crude oil in each location and relative transportation costs. Between January 2004 and late 2010, WTI consistently sold at about a $1 to $2 premium to Brent as the two crude oil prices closely tracked each other 


wti and brent crude oil prices


Starting in late 2010, WTI began to sell at a discount to Brent due to rapid increases in crude oil production from tight oil formations (This Week In Petroleum, March 14, 2012), primarily from the Bakken formation in North Dakota and the Eagle Ford shale in Texas, which led to transportation bottlenecks in and around the Cushing, Oklahoma storage hub where WTI oil is traded (This Week In Petroleum, May 16, 2012). In addition, Brent prices were being positively impacted by supply disruptions in the waterborne light-sweet crude oil markets (e.g., outages in Libya, Nigeria). The WTI discount to Brent continued to widen in 2011, reaching a monthly average high of about $27 per barrel in September 2011, before falling back to around $13 per barrel in June 2012. With limited pipeline capacity, the additional crude oil volumes have been moved out of the region by rail and to a lesser extent by truck. The $6 to $12 per barrel cost of transportation by rail and truck has been cited by some analysts as a floor for the Brent-WTI spread.

With the large gap between Brent and WTI prices, WTI is no longer representative of the marginal crude oil price driving petroleum product prices in the U.S. market. A comparison of Reformulated Gasoline Blendstock for Oxygenate Blending (RBOB) spot prices -- which represent wholesale gasoline prices -- to the Brent, WTI, and RAC crude oil prices in the largest U.S. refining region, the Gulf Coast, illustrates the growing disconnect of gasoline prices from both WTI and RAC prices since late 2010 (Figure 2). The spreads between Gulf Coast RBOB and the Brent, WTI, and RAC crude oil prices tracked each other closely, averaging 27 cents per gallon from 2006 through 2010. Since the end of 2010, only Brent has held near its historical average spread, averaging 18 cents per gallon, while the WTI and RAC spreads have averaged 57 cents per gallon and 42 cents per gallon, respectively. Thus, Brent has become more representative of the marginal cost of crude oil for the majority of refiners in the Atlantic Basin. In the Rocky Mountain region and the Midwest, discounted inland crudes are widely used by refiners. However, because Midwest product markets also rely on products produced outside of that region, product prices still reflect the price of waterborne crudes that are best represented by the Brent benchmark.

U.S. Gulf Coast RBOB- Reference Crude oil Price Spreads


Gasoline and diesel fuel prices both increase after many weeks
The U.S. average retail price of regular gasoline increased six cents this week to $3.41 per gallon, 23 cents per gallon lower than last year at this time. This is the first increase in the U.S. average retail gasoline price since April 2, 2012. Prices decreased in the Rockies and west, while to the east they increased. The largest increase was in the Midwest, where the average price was up 12 cents to $3.44 per gallon. The East Coast price increased six cents from last week and is now $3.35 per gallon. The price on the Gulf Coast is $3.16 per gallon, up four cents from last week. Moving west, the Rocky Mountain average price decreased three cents to $3.55 per gallon, and the West Coast price is $3.67 per gallon, down four cents from last week.

The national average diesel fuel price increased four cents to $3.68 per gallon, 22 cents per gallon lower than last year at this time. Prices increased in all regions of the Nation except the Rocky Mountains, where the price decreased three cents to $3.68 per gallon. The largest increase was in the Midwest, where the price increased six cents to $3.64 per gallon. On the Gulf Coast the price increased 4 cents to $3.61 per gallon. The East Coast price is $3.73 per gallon, an increase of three cents from last week. Rounding out the regions, the West Coast price increased a penny to $3.80 per gallon.

Propane stocks build again
Last week, total U.S. propane inventories continued their seasonal growth, adding 1.0 million barrels of new stocks to end at 63.2 million barrels, 18.6 million barrels (42 percent) higher than a year ago. Most of the build occurred in the Gulf Coast region, which added 0.8 million barrels of propane inventory. The Midwest and East Coast regions grew by 0.2 and 0.1 million barrels respectively, and Rocky Mountain/West Coast stocks dropped 0.2 million barrels. Propylene non-fuel-use inventories represented 6.6 percent of total propane inventories.

Monday, July 9, 2012

U.S monthly record for net distillate exports



One of the main drivers behind the United States' transformation from a net petroleum product importer to a net petroleum product exporter over the last several years has been the increase in distillate exports. U.S. Energy Information Administration (EIA) monthly data indicate the increase in net exports of distillates has continued largely unabated in 2012, with net exports of distillate fuels in April registering 981,000 barrels per day (bbl/d) (Figure 1), the highest volume since monthly U.S. trade data have been recorded. The distillate trade balance for April reflects both a near-record level of exports and a sluggish flow of imports.

U.S. monthly distillate fuel trade balance


In the first four months of this year, gross distillate exports have averaged 947,000 bbl/d, a 215,000-bbl/d (29-percent) increase compared with the same period in 2011. This average was supported by an April number that was the strongest to date in 2012 at slightly less than 1.1 million bbl/d, a 206,000-bbl/d (24-percent) increase over April 2011. The April exports also represent the second highest monthly total ever.

Sustained high levels of gross distillate exports have been supported by growth in global demand for distillate fuels, especially in the developing economies not part of the Organization for Economic Cooperation and Development (non-OECD). According to International Energy Agency (IEA) data, non-OECD demand for gas/diesel oil (a product category similar to EIA's distillate fuels) grew 403,000 bbl/d (3 percent) from April 2011 to April 2012. Due to global demand growth, distillate margins for refiners have generally been strong in recent years compared to those for other fuels. This has encouraged the production of distillate at U.S. refineries.

The largest destination for U.S. distillate exports is the Central and South America region and Mexico, a market where demand for distillate fuels has been robust, outstripping the ability of refineries in the region to satisfy this demand. In the first four months of this year, 60 percent of U.S. distillate exports went to Central and South America or Mexico, up from 57 percent for the same period last year. Growth in exports to those markets alone accounted for all of the year-over-year increase in exports for April, with exports to Central and South America up 223,000 bbl/d (58 percent) and exports to Mexico up 44,000 bbl/d (55 percent). This was partially offset by a weak month for distillate exports to Western Europe, another important market for U.S. distillate fuels. Exports to Western Europe were 62,000 bbl/d (19 percent) lower than April 2011. However, exports to Western Europe for all of 2012 are still up year-over-year, as reduced European refining capacity has worked to offset weak demand on the continent.

At the same time exports have been buoyed by global demand, lower distillate consumption in the United States has reduced the need to import. Through April, U.S. distillate consumption in 2012 was 112,000 bbl/d (3 percent) lower than the same period in 2011, in part reflecting reduced consumption of heating oil due to the mild winter weather. Combined with higher distillate production, this led to significantly reduced levels of imports, which through April were down 42 percent year-over-year. In April 2012, the United States imported 98,000 bbl/d of distillate fuel, which was the lowest monthly total since August 1985. Most U.S. distillate imports are shipped from Canada (82 percent in 2012 to date) to the East Coast (PADD 1), and are the result of opportunistic trade with refineries in Canada's maritime provinces which are closely integrated into the U.S. East Coast market. While the East Coast does also export some distillate fuel, the vast majority of U.S. distillate exports originate from the Gulf Coast, where refinery production far outpaces demand and distance to Latin America is short. The Gulf Coast also ships large quantities of diesel via pipeline to other U.S. markets.

Gasoline and diesel fuel prices continue to drop
The U.S. average retail price of regular gasoline decreased eight cents this week to $3.36 per gallon, 22 cents per gallon lower than last year at this time. This is the 13th consecutive week that the average U.S. price has declined. Prices dropped in all regions of the Nation, with the largest decrease in both the Midwest and West Coast, where the average price fell almost 11 cents, to $3.32 per gallon and $3.72 per gallon, respectively. The Gulf Coast price dropped seven cents to $3.13 per gallon, while the price on the East Coast and in the Rocky Mountains both fell a nickel to $3.29 per gallon and $3.58 per gallon, respectively.

The national average diesel fuel price decreased three cents to $3.65 per gallon, 20 cents per gallon lower than last year at this time. This marks the 12th consecutive week that the average U.S. price has fallen. The Rocky Mountain region saw the largest decrease, dropping seven cents to $3.71 per gallon. The West Coast price was down a nickel to $3.79 per gallon. The East Coast price fell almost two cents to $3.70 per gallon, while in the Midwest the average diesel price is now $3.58 per gallon, down about three cents from last week. Rounding out the regions, the Gulf Coast price fell three cents to $3.57 per gallon.

Propane inventories continue to climb
Total inventories of propane grew across all regions of the United States last week, adding 0.9 million barrels to end at 62.2 million barrels in total, 20.7 million barrels (50 percent) higher than a year ago. The Midwest regional stocks rose 0.3 million barrels, the East Coast and Gulf Coast regions each added 0.2 million barrels, and the Rocky Mountain/West Coast inventories were up 0.1 million barrels. Propylene non-fuel-use inventories represented 6.7 percent of total propane inventories.