U.S. Crude Exports Up Sixfold as Canada Taps Shale Boom
Oil exports from the U.S. in April rose to the highest level in 15 years as Canadian refineries replaced more expensive imports from Europe and West Africa with shale oil from North Dakota and Texas.
The U.S. shipped 268,000 barrels a day in April, the Energy Information Administration reported today. That’s the most since April 1999, and a more than sixfold increase since April 2012. Federal law allows exports of unrefined crude to Canada and restricts them to most other destinations.
The increase in exports follows a boom in oil production driven by horizontal drilling and hydraulic fracturing, or fracking, in places like North Dakota and Texas. The surge in output has increased supplies in the U.S., driving down prices relative to the rest of the world.
“The boom in U.S. production caused a price differential to grow between foreign crude and U.S. crude,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, today. “The margins for U.S. crude are just so good that there’s no reason a Canadian refinery wouldn’t want to use it if possible.”
U.S. crude output rose to 8.47 million barrels a day in the week of May 23, the highest level since 1986. Eagle Ford light crude in south Texas sells for $9.71 a barrel less than Brent, the benchmark for European and African oil, according to data compiled by Bloomberg. It costs $2 a barrel to ship crude from Texas to Canada, Marathon Petroleum Corp. (MPC) said in a May presentation.
Exports to Canada from the U.S. Gulf Coast averaged 134,000 barrels a day in the first quarter, according to the EIA. March U.S. exports were 246,000 barrels daily.
Refineries on Canada’s East Coast are designed to process light, low-sulfur crude like the type produced by fracking in the U.S., said Hannah Breun, a Washington D.C.-based analyst for the EIA. Plants on the U.S. Gulf Coast are generally better suited to refine thick, high-sulfur crudes from Mexico, South American and Western Canada.
Corpus Christi, Texas, the closest port to the Eagle Ford field, shipped out 468,000 barrels a day in April, according to data from the city’s Port Authority. That’s up from 15,000 barrels two years earlier. About 80 percent of that oil stays in the Gulf Coast, with the rest going to Canada and the U.S. East Coast, Brad Barron, NuStar Energy LP (NS) Chief Executive Officer, said in April.
Refineries in Ontario, Quebec and Canada’s Atlantic Coast imported about 615,000 barrels a day in February, according to the country’s National Energy Board. Under current export rules, shipments to Canada from the U.S. will rise to 400,000 barrels a day in 2015 and stay at that level through 2020, Damien Courvalin, a New York-based analyst for Goldman Sachs Group Inc., said in a June 10 research note.
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