Houston — US crude exports fell by 156,000 b/d in December, to 442,000 b/d, after exports into Eastern Canada dried up, a S&P Global Platts analysis of US Census Bureau data released Tuesday showed.
US crude exports to Canada declined by 155,000 b/d, to 196,000 b/d, as flows from New York and Maine dropped to zero after averaging 187,000 b/d in October and 25,000 b/d in November. Crude exports from New York into Canada averaged 137,000 b/d over 2016 and are most likely rail shipments of Bakken crude.
Statistics Canada data confirms that Canada slashed its US crude imports in December, bringing in more Nigerian, Algerian and Saudi Arabian cargoes, while total imports were down by 145,000 b/d at 593,000 b/d.
The Statistics Canada data shows that New Brunswick imports from the US fell to zero in December, with the province's US imports averaging 35,000 b/d in 2016 and shipments arriving from Texas and Louisiana.
Irving Oil's 300,000 b/d refinery in New Brunswick -- the largest in Canada -- dealt with a pair of fluid catalytic cracker outages in late-November and mid-December, but the data shows the province's total imports were relatively steady in December, up 9,000 b/d at 162,000 b/d.
Quebec's imports of US crude fell 5,000 b/d to 85,000 b/d in December, with Bakken crude from North Dakota accounting for 63% of the imports, according to the Statistics Canada data.
Platts refining margins data suggest that waterborne crude imports were more competitive than local Eastern Canadian grades in December.
The cracking margin for Brent on the US Atlantic Coast averaged $5.66/b in December compared to $4.79/b for Hibernia. Margins for Nigeria's Bonny Light crude were also strong, averaging $5.06/b.
Platts does not assess Eastern Canadian refining margins, but the US Atlantic Coast can be used as a proxy.
The Statistics Canada data shows that Canada's imports of Norwegian crude were down 19,000 b/d at 75,000 b/d but were above the average for 2016 through November of 38,000 b/d.
Despite the drop in US crude exports to Canada, US crude exports to the rest of the world remained steady in December, aided by a wide Brent/WTI spread, while US Gulf Coast crude differentials point to increased export demand.
Brent crude's premium to WTI averaged $2.03/b in December, out from 81 cents/b in November, making US crudes more attractive in Atlantic Basin markets.
USGC EXPORTS TO EUROPE/CHINA STEADY
US crude exports to Europe rose 26,000 b/d to 96,000 b/d in December, with crude arriving in the United Kingdom, the Netherlands and Italy. Exports to Europe hit a record 209,000 b/d in September 2016 when the Brent/WTI spread averaged $1.68/b.
Exports from the Houston/Galveston/Port Arthur area remained robust at 255,000 b/d, down from 295,000 b/d but well above the 2016 average through November of 225,000 b/d.
Firm export demand out of the US Gulf Coast supported differentials for regional grades, with WTI FOB Houston averaging a $2.35/b premium to WTI in December, up from $1.73/b in November.
Differentials for WTI Midland -- an increasingly important export grade as Permian Basin production continues to rise and takeaway pipeline capacity to export terminals at Houston and Corpus Christi increases -- also rose in December, averaging a 80 cents/b premium to WTI compared to 13 cents/b in November.
US crude was shipped to China for a third consecutive month, with December exports averaging 63,000 b/d after hitting a record 76,000 b/d in November.
US crude exports to China averaged 23,000 b/d in 2016, a record by large margin. The previous record setting year was 2004, when the US exported 2,000 b/d exclusively from Alaska.
After the US Congress lifted crude export restrictions -- which exempted barrels produced in Alaska, albeit with Jones Act tanker restrictions -- in December 2015, US crude exports to China shipped mostly from Texas in 2016.
The liberalization in US crude exports took shape as Chinese authorities granted crude import licenses to independent teapot refineries in the Shandong province for the first time.
The independent refiners have shown a willingness to try a wider array of foreign crude blends rather than focus solely on light Russian grades, namely ESPO Blend from the nearby Kozmino port.
EXPORTS LIKELY REMAINED HEALTHY IN JAN, FEB
Looking ahead, US Census data for January and February will likely show healthy crude exports, after the Brent/WTI widened further to average $2.24/b in January and $2.30/b thus far in February.
Moreover, differentials for WTI FOB Houston and WTI Midland have remained firm in recent weeks, with the former averaging a $2.34/b premium to WTI in January and a $2.38/b premium in February.
Finally, cracking margins for US crudes in Northwest Europe have risen sharply in recent months. After averaging $2.99/b in December, the cracking margin for Light Houston Sweet in the Amsterdam-Rotterdam-Antwerp refining hub jumped to $4.75/b in January and $5.49/b in February, making the grade more competitive than regional grades like Azeri Light, Forties and Cabinda.
--Jack Laursen, jack.laursen@spglobal.com
--Edited by Richard Rubin, richard.rubin@spglobal.com