Port of Corpus Christi sees crude exports plunge 35% and counting

Houston — Crude oil shipments from the United States' top oil-exporting hub have plunged 35% since the first quarter with more declines expected this summer as the impacts of the coronavirus pandemic continue to ripple throughout the industry.

Activity levels at the Port of Corpus Christi in Texas and throughout much of the Gulf Coast were buoyed for a while by preexisting contracts and hedged oil prices even as crude prices fell to record lows from the collapse in global oil demand. But a lot of those deals are now rolling off, and the stark dip in demand is becoming more clear, said port CEO Sean Strawbridge.

"We've certainly seen a drop. Both crude and refined products are down significantly from their first-quarter record highs," Strawbridge said. "It will continue in June and perhaps even through the summer."

Crude exports from the Port of Corpus Christi fell from a record-high average of 1.7 million b/d in the first quarter down to about 1.1 million b/d last week, he said, and Strawbridge expects the swoon to deepen a bit more in the weeks ahead.

According to the US Energy Information Administration, US crude exports the week ending May 8 averaged 3.53 million b/d. S&P Global Platts Analytics data shows US crude exports climbing to 4.06 million b/d for the week ending Friday. Exports from Corpus Christi and Ingleside, which the Port includes in its calculations, have averaged at roughly 1 million b/d over the past two weeks, Analytics data shows.

US producers are shutting in production and storing more crude longer term both on and offshore. With global oil demand having plunged by as much as 30% in April, crude exports were expected to eventually feel an impact, even as the arbitrage remains open.

The arbitrage into northeast Asia is still open for WTI crude at Houston, with a pricing advantage of about $4.15/b over Russian ESPO crude, Platts Analytics calculations show.

STORAGE ISSUES

Although the Cushing, Oklahoma, crude storage hub is at more than 80% capacity and mostly contracted up, there are still ample places to store or ship crude along the USGC.

The Port of Corpus Christi hasn't hit 70% capacity yet, Strawbridge said, and more crude tanks are currently under construction. A rush to load up tankers for floating crude storage has helped alleviate the breakneck pace of the onshore crude storage build by a bit, he said.

"Storage has fared a bit better here than we anticipated," Strawbridge said. "Cushing is near capacity, so they need to find other options. We've seen more floating storage down here, which has helped. But floating storage isn't going to move the needle too much."

And while Strawbridge said US producers were hesitant to shut in their wells to curtail volumes, those belated decisions are now making an impact on reducing the global glut of oil. US producers have committed to reducing crude volumes by at least 1.7 million b/d in June, while Canada has cut another 1 million b/d, according to S&P Global Platts data.

While the industry may be moving past the bottom of the bust, there's still a long recovery ahead, Strawbridge warned. Many companies won't survive and it's still up in the air whether there could be greater lockdowns in the fall or in 2021 if there are more coronavirus outbreaks in the US and around the world.

The oil industry will follow the global economy, and the world is still a long way for any semblance of normalcy, said Ethan Bellamy, an energy analyst with Robert W. Baird.

"Unless we get planes back in the air and employment back up, the oil industry is in a depression until proven otherwise," Bellamy said. "All the consequences of the collapse, including bloated storage, are just supply chain dominoes falling."