February 11, 2019

The Rush of Crude and Capital To and Through the Gulf Coast

The Stratas Advisors Insight below is an excerpt of the full report available to subscribers of the North American Oil service which offers crude oil supply and demand forecasts, balances, pricing and differential outlooks and infrastructure analyses for the 5 U.S. PADD regions and nation as a whole. Contact us for access to the service and the dedicated analytical staff who make it available.  

Record setting light crude oil production growth and relatively flat refinery runs which are already in the mid-90% range shows that the U.S. industry has a requirement to export crude to markets beyond the U.S. It's a good thing that the crude export ban was lifted in December 2015. Since then, midstream developers have set a direction to bring light crude production to and through the most liquid crude and regional refining market in the world along the U.S. Gulf Coast which has direct marine access to global markets.

The shift in crude flow from inland regions to the Gulf Coast has driven an increase of domestic light crude runs along the Gulf Coast. Furthermore, U.S. crude export infrastructure innovations have quickly enabled exports to increase in each year since 2016 when crude exports were made legal in full. 

Despite relatively limited export infrastructure, U.S. crude exports are on a path to increase by more than 320% from 2015 export average of 465 Mbbl/d to an estimated 2018 export average of 1,974 Mbbl/d (Used EIA weekly data for December estimate). But we project U.S. production should grow by 1.2 MMbbl/d in 2019 from an estimated 10.9 Mbbl/d in 2018. This has not only led to additional pipeline projects looking to send the incremental volumes to the Gulf Coast but also an introduction of VLCC’s as the main option to load and transport crude to long distance markets.

A flurry of tidewater terminal projects have been announced around the Gulf Coast as midstream companies look to keep the momentum of U.S. production growth by developing or re-purposing of Gulf Coast terminals to partially/fully load cost efficient ships called Very Large Crude Carriers (VLCC’s).

crude flows chart replacement

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