US Oil Exports Down But Not Out

According to the Energy Information Administration’s Petroleum Supply Monthly report, total liquids shipments fell some 800,000 barrels per day in January from the month prior, leaving exports of crude and products at just under 9.4 million b/d.

The factors informing the dip were largely transient, although the distribution of US exports is likely to remain in flux for some time. Lower refinery utilization, itself on top of outright lower refining capacity, played a role. The US downstream operated at just 86.5% in January, down from 88% in December and the lowest level since October of 2021.

Several refineries faced unplanned outages late in 2022 due to severe winter weather. In some cases, such as Suncor’s Colorado plant, facilities have remained largely offline, crimping activity in January. In addition, the US refinery complex was already set up for heavy maintenance after running hard all last year.

With fewer refineries running at a lower rate and regional outages creating the need for product sourced elsewhere in the country, domestic demand for fuel was shoved into greater competition with exports despite relatively tepid consumption.

Foreign Trade

Some exports also faced foreign competition. In Europe, for example, the flow of diesel from the US plunged from 237,000 b/d in December to just 44,000 b/d in January. To be sure, this was in part a function of refining issues and demand in both areas, but it also coincided with a surge of Russian products — especially diesel — to the EU ahead of February’s embargo.

Total product flows to Europe were some 652,000 b/d, down from 758,000 b/d in December, while crude shipments slipped roughly 217,000 b/d to 1.7 million b/d.

The bulk of total liquids exports continue to go to Latin America. The region accounted for almost 3 million b/d in US petroleum shipments in January, the lion's share of which — some 2.8 million b/d — consisted of refined products. The region also takes in some 170,000 b/d of US crude.

US fuel exports to Latin America were down more than 250,000 b/d from December and ran their lowest since last October. Diesel flows dropped 271,000 b/d to 853,000 b/d, their lowest in 16 months.

Post-Maintenance Outlook

Exports should recover. Not only will the US downstream emerge from maintenance come May, but the EU’s embargo on Russian products is now in full effect. US fuels could become an even more significant source for Europe as it continues to replace Russian volumes.

Experts have expressed deep skepticism that the logistics are in place for Russian flows to Latin America to roil US shipments at a significant level. Still, Russia managed to dispatch some 110,000 b/d of diesel to Brazil in March, doubling February's volume, so surprises could be in store.

On the home front, demand remained under pressure in January. EIA data peg consumption at some 19.5 million b/d, almost flat with December and the weakest January reading since 2017. Demand for gasoline fell to 8.3 million b/d, down some 500,000 b/d for the month.

Several market players, including independent refiner Phillips 66 and Marathon Petroleum, have said they do not expect domestic gasoline demand to ever recover to pre-pandemic levels.