A year removed from Russia's invasion of Ukraine, US crude exports continue to see strong volumes, while new trends have begun to emerge in flows as the global oil landscape has shifted.
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US crude export volumes saw a record year in 2022 as a combination of increased demand from Europe and added supply from increased US production and a flood of crude from the US Strategic Petroleum Reserve supported export volumes. Indeed, total US crude exports over 2022 averaged 3.602 million b/d, up from the previous record set in 2020 of 3.166 million b/d, according to official US Census Bureau data. Following the Feb. 24, 2022, Russian invasion of Ukraine, many European end-users began to move away from Russian feedstocks, giving a boost to demand for barrels out of the US. Indeed, from March through December of 2022, US crude exports to Europe averaged 1.557 million b/d, surpassing even those to Asia over the period which averaged 1.548 million b/d, Census Bureau data showed. Over the same period in 2021, US crude exports to Europe averaged 1.12 million b/d, while those to Asia averaged 1.381 million b/d.
US crude export volumes have kept their momentum in 2023, with flows over the week ended Feb. 17 reported at 4.597 million b/d, the second highest weekly export level reported by the US Energy Information Administration in 2023. The four-week moving average for crude exports over the period ended Feb. 17 was reported at 3.534 million b/d.
SPR releases, production increases
It remains to be seen if US crude exports will see the same level of volumes reported in 2022 as the flood of US Strategic Petroleum Reserve barrels seen through 2022 following the Biden Administration's decision to release 180 million barrels from the SPR will be largely absent. While 26 million barrels of SPR crude is due to be released from April through June of 2023, the volumes slated for sale are far less than the 2022 release. The lack of these SPR barrels will lead to fewer barrels available for export and could put a ceiling on US crude exports compared to 2022 levels. Increased Permian production, which S&P Global Commodity Insights forecasts to grow by 385,000 b/d in 2023 to reach 5.7 million b/d of production, as well as higher Canadian production, will provide some added supply for exports, however, S&P Global expects US crude exports to see some decline in 2023 from 2022 record levels due to absent SPR volumes.
New trends emerge
Meanwhile, two trends have emerged since the invasion in US crude exports to Europe: regular flows of medium and heavy sour grades exported from the US to Europe and increasing volumes to being booked on Very Large Crude Carriers.
While exports of light sweet crude, mostly Midland-spec WTI barrels, saw an uptick in flows to Europe in 2022 compared to 2021, flows of medium and heavy sour grades became regular. After accounting for no exports in 2021, US exports to Europe of medium sour crude grades averaged 49,247 b/d in 2022, according to Kpler shipping data. Similarly, after no exports in 2021, US exports of heavy sour grades to Europe averaged 26,627 b/d as European refiners sought replacements for Russian grades like Urals.
Additionally, higher volumes of US crude exports to Europe have been shipped on VLCCs, which, for light grades like Midland-spec WTI, can hold over 2 million barrels. In 2021, just 5,499 b/d of US crude exports to Europe were shipped on VLCCs, while in 2022, 113,678 b/d were booked, Kpler data showed. That trend has continued in 2023, with January setting a record 385,133 b/d of US crude exports to Europe shipped on VLCCs.
It is clear that the changes in global trade flows, particularly flows of US crude exports, have undergone important changes in the wake of the Russia-Ukraine war and these trends look to continue in 2023 as geopolitics remain a top concern amongst markets while the specter of macroeconomic uncertainty continues to cast its shadow over sentiment and outlooks.