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Houston — US crude exports have weathered both a pandemic and a particularly busy hurricane season to rebound almost to the record highs of early 2020, but weaker US production volumes threaten export flows heading into next year.

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US crude exports peaked at 3.71 million b/d in February and fell to a year-to-date low of 2.75 million b/d in June, according to the US Energy Information Administration, but they've since rebounded to 3.51 million b/d for the week ending Sept. 25. S&P Global Platts Analytics is projecting US crude exports at 4 million b/d for the week ending Oct. 2 now that the Gulf is clear of tropical storm activity.

"Crude exports have been a bit better than we expected given the amount of shut-ins we had from production cuts," said Kendrick Rhea, energy analyst with East Daley Capital Advisors. "At the same time, crude export facilities are going to be really overbuilt unless prices substantially change."

On the one hand, it's impressive that exports remained resilient during the historic global demand collapse and an ongoing hurricane season that has dipped into the Greek alphabet to name storms for just the second time ever. But this was still supposed to be another big year of growth for crude exports with surging Permian Basin oil production, so 2020 crude exports are about 1 million b/d less than they would have been minus the coronavirus, Rhea said.

East Daley has US crude exports holding pretty flat at 3.3 million b/d in both 2021 and 2022 before ticking back up again. Weaker refining demand in the US forced more barrels to be shipped overseas, Rhea said.

However, Platts Analytics sees US Gulf Coast crude exports, excluding Canada, to fall from a projected 2.9 million b/d this October to just 1.44 million b/d in April 2021 before slowly rising back up again. The reason is that weak 2020 drilling and completions activity will lead to weaker production and, therefore, lower exports until new drilling activity rises. Platts Analytics projects 2021 US production volumes to fall 10% from an already weak 2020. US production isn't expected to return to pre-coronavirus levels until 2023.

And the big wild card remains the pandemic. A new Platts Analytics "COVID-19 Special Report" on Sept. 30 highlights that the so-called "second wave" of coronavirus threatens the global energy sector's anticipated recovery by late 2021. A successful vaccine rollout by mid-2021 is critical to keeping the recovery path that was assumed as the base case, the report said.

The report also highlights the potential long-term ripple effects on "work from home" initiatives, air travel, commercial real estate, socialization and recreational activities.

"In this sense, COVID-19, and its impacts, can be characterized as the 'rarest of black swan events,'" the report concluded. "The risk, at this point, is not the single swan that most perceive, but that it becomes a gaggle of black swans."

From a Texas view

Exports from the nation's top oil-exporting hub — the Port of Corpus Christi — hit a record high of more than 1.5 million b/d in February only to see those volumes fall 20% by April as the pandemic took hold.

In August exports hit a new record of 1.78 million b/d as global demand steadily rose and the new South Texas Gateway Terminal opened up at the port.

"You're seeing some countries start to have that normalcy again. And the shut-in volumes were easing back into the market, so we started to see our export numbers rise," said Port of Corpus Christi spokesman Omar Garcia.

While the USGC isn't out of the woods yet, the bevy of hurricanes and tropical storms have not caused much damage to Corpus Christi or any of the major export terminals, although about 1 million b/d of refining capacity remains offline in Louisiana.

Most recently, in September Tropical Storm Beta forced the Port of Corpus Christi to close for two days. But there wasn't much damage and Beta only succeeded in backing up tanker traffic, Garcia said.

During the early months of the pandemic, the worst lockdowns shifted from Asia to Europe to North America over time and not all at once, so there was never any big collapse in crude exports. And there were still a lot of cargoes locked-in for contracted shipments that couldn't be canceled.

Still, Garcia acknowledged it's going to take years to fully recover from the pandemic. And a recent wave of construction growth at the port means Corpus Christi terminals have more export capacity than they currently need.

Other crude export projects are pending both within the Port of Corpus Christi and offshore. Deepwater crude export terminals led by both Enterprise Products Partners and Phillips 66 are on hold for now. And at Point Comfort -- in between Corpus and Houston -- startup Max Midstream is building new crude-export facilities and should start shipping small volumes by the end of this year.

In terms of pricing, the recent jumps in crude exports coincide with a marked improvement for arbitrage opportunities for West Texas Intermediate crude from the Magellan East Houston terminal into Northeast Asia. According to the Platts Crude Arbflow calculator, arbitrage incentives for WTI MEH in Japan against local ESPO crude have averaged 52 cents/b through the first 28 days of September, up from averaging minus 36 cents/b and minus 15 cents/b in July and August, respectively.

US crude exports to China are slated to hit a four-month-high in September, averaging 683,000 b/d, which is the most since May when crude exports to China saw a record high of around 1.3 million b/d, according to data from Kpler, a data intelligence company.

Sandy Fielden, director of oil research at Morningstar, said US crude exporters also managed to send more cargoes to Europe much of this summer. The light sweet shale crude is desirable in Europe because it's a market saturated with diesel, Fielden said. New production from Libya, weaker compliance from OPEC+, and upticks in COVID-19 cases could also dent US exports, he added.

"Generally though, given how well US exports have done in a crazy year, I expect them to continue at current levels provided international consumption holds up and OPEC+ stay in line," Fielden said.