In this list

US ELECTIONS: Middle East could take more Asia share from US oil

Energy | Natural Gas | Oil | Crude Oil | Governments

Energy convergence breaks down silos as industry confronts climate change

Energy | Natural Gas | Natural Gas (North American) | Oil | Crude Oil

Platts Upstream Indicator

Oil | Crude Oil | Coronavirus | Energy Transition | Macroeconomics

37th Asia Pacific Petroleum (APPEC 2021)

Energy | Natural Gas | Oil | Metals | LPG | Non-Ferrous

UAE's Dana Gas to operate onshore Egypt assets after winning arbitration case

Agriculture | Grains

China’s grain auction and meat production patterns point to rising imports 

US ELECTIONS: Middle East could take more Asia share from US oil


US output could drop more than 1 million b/d in 2021

Biden promised to stop drilling permits on federal land, water

China, India have been big buyers of US oil

Dubai — The outcome of US presidential election in November is not expected to have an immediate impact on global oil flows, but Middle East producers will be closely watching the results, in the hopes of gaining more market share in Asia.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

US oil production is returning from peak shut-ins of 2.8 million b/d during the oil price crash in spring 2020, but drillers' severe capital expenditure cuts and slowing drilling activity will constrict output through 2021. S&P Global Platts Analytics expects US oil production to decline about 880,000 b/d year on year in 2020 and more than 1 million b/d in 2021.

Democratic nominee Joe Biden has promised to stop issuing drilling permits for federal lands and waters, which could shrink US oil output growth by up to 2 million b/d by 2025, according to Platts Analytics.

That will give Middle East producers an advantage to step in and replace those barrels. Under the Trump administration, the US has made inroads into key export markets including China, India and Taiwan, US Energy Information Administration data showed.

Chris Midgley, head of Platts Analytics, acknowledged that Biden would take a more aggressive stance on fossil fuels.

'All struggling'

"That being said, I don't believe for a moment that his first year will be marked by him taking on the oil and gas sector at a time when they are all struggling," he said.

He added that Biden would likely make sure he is "sustaining the momentum of the economy."

"The oil industry not only makes a significant contribution to the economy but has also given the US a stronger leverage in foreign affairs," Carole Nakhle, CEO of London-based Crystol Energy, said. "It is therefore unlikely that Biden will cause serious damage to the industry."

Even if a Biden administration puts 2 million b/d of US crude output at risk by the end of 2024, that would still leave US production slightly above current levels at roughly 11 million b/d.

"So far, Biden has resisted pressure from forces to his left to ban fracking, instead pushing proposed investment in green jobs," said Neil Quilliam, associate fellow in Chatham House's Middle East & North Africa Program in London.

"Even if he stops short of an outright ban on fracking, the re-imposition of Obama-era regulations promises to drive down oil production, though it is unlikely to transform the country into a significant crude importer once again. As such, Middle East crudes will continue to track towards Asia, whilst refined products will continue to flow to the US."

In June, US exports totaled 2.75 million b/d, with China and India each taking up 13% of the total, according to EIA data. The US has been able to export more crude as pipelines and terminals were built to accommodate the rise in output, primarily from the Permian Basin. Restrictions on US crude exports were removed in 2015 under the Obama administration.

Arbitrage window

Arbitrage figures from Platts Analytics showed that the window to send WTI Magellan East Houston, or MEH, to North Asia is open, or economical, along with Abu Dhabi's Murban crude, while the window is closed for Iraq's Basrah Heavy.

The spread between WTI and other benchmarks Dated Brent and Platts Dubai is expected to widen by the end of 2021, making WTI more competitive. WTI will be $3.85/b below Dated Brent by December 2021 compared with minus $3.25/b this month, Platts Analytics forecast.

The spread between WTI MEH on a CFR North Asia basis and Abu Dhabi's Murban on an Asia delivered basis has averaged $1.21/b to date in Q3, $2.41/b in Q2 and 54 cents/b in Q1, Platts data showed.

South Korea, Asia's biggest US crude customer in 2019, received just 5.24 million barrels from the US in July, down 65% from a year earlier and marking the biggest decline since the country began North American crude purchases in 2015, according to latest data from state-run Korea National Oil Corp.

At the same time, South Korea's crude imports from its top supplier Saudi Arabia jumped 55.6% year on year to 38.447 million barrels in July, the KNOC data showed. Crude imports from the UAE in July also rose 23% from a year earlier to 10.487 million barrels, while intake of Qatari grades climbed 33.4% from a year earlier to 6.041 million barrels.

Biden's victory could potentially pave the way for an improvement in US-China relations, with state-run Chinese oil and gas companies hoping for a more lenient revision to its US energy purchase obligation.

China has stepped up its purchases of US crude oil in recent trading cycles in an effort to comply with the Phase 1 trade deal with Washington struck in January.

Iran and Venezuela could also add barrels to the world market if sanctions are eased under a Biden presidency. Platts Analytics predicts 1.5 million b/d of Iranian exports could return to the market within a year of a new deal that removes US oil sanctions.

"I honestly don't expect Biden will have that much impact on US production, not in a first term anyway. Prices and economics will be more important," said Robin Mills, CEO of Qamar Energy in Dubai.