This report is from Stratas Advisors' North American NGL and North American Oil services.

Shale resources and productivity in the U.S. may have already enabled the country to become the world's largest liquid petroleum exporter, according to available data for the U.S., Russia and Saudi Arabia. And while the U.S. may be achieving this on the rare week when the stars align for the fullstream U.S. energy industry, we believe fundamentals around production, infrastructure capacity, refining and price spreads could lead the U.S. to sustainably taking the top rank for the longer term in the very near future.

Is It Officially Official?

U.S. liquid petroleum exports estimated by the U.S. Energy Information Administration (EIA) for the week ended April 20 came in at an all-time high of 8.332 million barrels per day (bbl/d), comprised of 2,331 bbl/d crude oil and 6,001 bbl/d refined products. That is an impressive number, but again, we emphasize this was only for one week. Averaging the EIA's weekly data estimates for the four weeks ending in April, we calculate that the U.S. exported an average 7.11 million bbl/d of liquid petroleum. That number is lower but still a record four-week average and is very impressive as well. But the story is even more bullish when we look at the EIA's actual reported monthly data which is released several months after the fact due to data survey, collection and verification time lags. In the last three months of 2017, the reported monthly liquid petroleum export data came in more than 500,000 bbl/d greater than the corresponding weekly averages. So by summer when the EIA's April monthly data is published, we could be talking about a 7.61 million bbl/d peak in exports set in April, which would easily exceed the 2017 peak for the U.S. and the 2017 annual for Russia.

Liquid Petroleum Exports

Compared to the top exporters, April's anticipated U.S. monthly and peak four-week average nicely exceed the flow of exported liquid petroleum out of Russia in the second half of 2017 (6.836 million bbl/d), according to an average of monthly data provided by the global Joint Organizations Data Initiative (JODI). Given those numbers, the U.S. could conceivably have exported more liquid petroleum in April than Russia, where production and exports have been sagging lately on voluntary agreements or other dynamics. Saudi Arabia's averages from second-half 2017 monthly JODI data for liquid petroleum exports show the kingdom exported 8.333 million bbl/d in that period. That's less than 1,000 bbl/d from the U.S. April 2018 peak, or about the equivalent of just two rail tanker cars of petroleum products.

On a longer-term basis, can the U.S. sustain export levels to meet or beat Russia and/or Saudi Arabia to take the top spot for global liquid petroleum exports? The 12-month average from the final monthly EIA data show the U.S. exported 6.343 million bbl/d of liquid petroleum in 2017, or 6,407 bbl/d when averaging the last 12 months ended in February 2018, the most recent data point available. Using latest available global JODI data, we see Russia exported 7.1 million bbl/d through January 2018 and Saudi Arabia exported 8.4 million bbl/d through February 2018. So the U.S. still has a way to go to sustainably replace one or both at their current rank. Yet, change is coming. Both of those are in line with 2017 averages, although the most recent 12-month average for the U.S. incorporating January data shows a more considerable gain in the first month of 2018.

Part of the strong growth we expect for U.S. liquid petroleum exports comes as a result of the US just having begun exporting crude oil in high capacity very large crude carriers (VLCC) out of the now-bidirectional Louisiana Offshore Oil Platform. These VLCCs can be loaded with 2 million bbl in under a week, as shown by a number of such vessels export trips already sent out in 2018.

Soon, we anticipate similar VLCC exports, enabled by reverse lightering procedures at the Oxy Ingleside terminal in Texas at Corpus Christi, at the two VLCC berths at the Texas Gateway Terminal coming in 2019 also to Ingleside, and the Enterprise Texas City terminal with at least 1 VLCC berth. With midstream capacity to load at least four more VLCC each week, the crude export rate from the US could step up by 1.14 million bbl/d on top of current levels.

If all the stars align, including incentives across the fullstream energy chain (especially upstream producers, midstream pipelines and ports, downstream refiners and global market prices) drive loaders to send out 4 more VLCCs in a week wherein the US revisits the 8.33 million bbl/d export peak of April 20, we could be soon talking about U.S. weekly liquid petroleum exports of 9.5 million bbl/d.

Key Takeaway

Depending on how many of the 52 weeks in any given year that the U.S. industry can sustain such a loading and export schedule of crude oil, condensate, products and NGL, this once net-importing nation could easily use planned or existing infrastructure to seize the No. 1 spot for liquid petroleum exports in very short order. But that will also depend on moves by both Russia and Saudi Arabia. With the U.S. shale industry sticking its nose bigly under the crude export tent, the kingdom has clearly begun emphasizing refined product exports that now represent 18% of total exports (up 10% from five years ago). And the Kingdom will start up another large refinery at Jazan (400 million bbl/d) in and around 2019-2020, which will enable its liquid petroleum exports to potentially rise without affecting compliance with any future OPEC deal(s). Russia, on the other hand, has seen less reliance on refined product exports (down 8% over last five years to 28% in 2017).