US Exporting WTI Crude Oil to EU, Cramps OPEC’s Pricing Plans
$USO, $OIL, $XOM, $BP
US Crude Oil producers are benefiting from OPEC’s price squeeze and exporting cheaper WTI Crude Oil to Europe in record amounts.
Russia alligned with the Organization of the Petroleum Exporting Countries (OPEC) last year in cutting Crude Oil output jointly by 1.8-M BPD, a deal they say has largely re-balanced the market and helped raise benchmark Brent Crude prices to nearly 4-year highs.
Now, high prices brought about by that pact, coupled with surging US output, are making it harder to sell Russian, Nigerian and other Crude Oil grades in Europe, traders say.
“US Crude Oil is on offer everywhere,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude and has recently started purchasing US Crude Oil. “It puts local grades under a lot of pressure.”
US Crude Oil output is expected to hit 10.7-M bbl this year, rivaling that of top producers Russia and Saudi Arabia.
In April, US supplies to Europe are set to reach an all-time high of roughly 550,000 BPS, according to the Thomson Reuters Eikon trade flows monitor.
In January-April, US supplies jumped 4X Y-Y, that is 68 large Aframax tankers full, according to the same data.
US Crude Oil is increasingly finding homes in foreign refineries at the expense of Crude Oil from OPEC or Russia.
In Y 2017, Europe took roughly 7% of US Crude Oil exports, Reuters data showed, but the proportion has already risen to 12% this year.
Top destinations include Britain, Italy and the Netherlands, with traders pointing to large imports by BP, Exxon Mobil and Valero.
The gains for US suppliers could come as a welcome development for President Donald Trump, who accused OPEC on Friday of “artificially” boosting Crude Oil prices.
“Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!” President Trump Tweeted.
European refiners started experimenting with US Crude last year, and now they know how to process it.
US Crude Oil gained in popularity in part because of the wide gap between WTI, the US benchmark, and Brent, which is more expensive and sets the price for most of the world’s Crude grades.
This gap, known as the Brent/WTI spread, has averaged $4.46 bbl this year, nearly 2X as high as the year-earlier figure, Reuters data showed.
Brent Crude at 73.94 looks to moving higher towards 75-76 which is important resistance. A fall thereafter could be seen targeting 72-71 medium term.
WTI 68.19 has room to move to 69.0-69.5 this week before coming off sharply.