The US Crude Export Chronicles: September 2021

Author Amanda Hilow, Associate Editor and Eunice Bridges, Senior Reporter

Offshore production in the US Gulf of Mexico was returning slowly after shut-ins from Hurricane Ida, but the recovery hit a wall with nearly 300,000 b/d still suspended more than a month after the storm. And the effects are reverberating in global markets.

Welcome back to our monthly blog: The US Crude Export Chronicles, by senior reporter Eunice Bridges (@eunicebridges12) and associate editor Amanda Hilow (@HilowMidpoint). Come back every month for Argus’ take on US crude exports and how they are faring in the uneven Covid-19 recovery.

Hot topics
Roughly 295,000 b/d of offshore US crude production remains suspended more than a month after Hurricane Ida’s arrival as a Category 4 storm in late August. Most of that volume is likely medium sour Mars crude amid lasting damage at Shell’s West Delta-143 (WD-143) shallow-water platform, which the company confirmed may be off line for several months. The WD-143 A platform, which handles crude and natural gas production from the Mars and Ursa platforms, will not be back in service until sometime in early 2022. The WD-143 C, which handles Olympus platform output, is expected to be up and running again in the fourth quarter of this year.

Shell also declared force majeure on "numerous" crude delivery contracts in the wake of the storm. 

The Mars monthly average moved to its highest since July trade at a roughly 65¢/bl average discount to WTI, up more than $1.30/bl compared to the Mars discount during the September trade month, which concluded just before Ida’s landfall. Mars trade month volume totaled 103,000 b/d for October, reflecting a 77pc drop compared with almost 450,000 b/d during the September trade month.
 
mars-trade-ytd
 
Census surprise 
Before Ida messed with the Mars market, crude export data was already volatile, and July’s drop was especially steep. Domestic crude exports tumbled by 23pc to 2.7mn b/d in July, led by declines in India and China, according to the latest Census Bureau trade data. 
 
India took about 374,000 b/d of US crude in July, down by 147,000 b/d from June. But India was still the second highest recipient of US crude in July, surpassed only by South Korea. 

US crude headed to China fell to about 169,000 b/d in July, down by 75,000 b/d from June, as exports to that country continued to lag behind year-earlier levels. 
 
In the pipeline 
A major midstream company made a big move involving serious money. Enbridge agreed to buy Moda Midstream Operating to the tune of $3bn in cash, including the crown jewel of the deal – Moda’s huge export terminal near Corpus Christi, Texas.

The terminal, built in 2018, has 15.6mn bl of storage capacity, and can partially load very large crude carriers (VLCCs). Moda told Argus earlier this year the terminal will be able to load VLCCs up to 1.6mn bl once a dredging project is complete in the Corpus Christi Ship Channel. Rebranding is also in the works – the terminal will be named the Enbridge Ingleside Energy Center.

Speaking of Corpus Christi, the big dredging project at that top US export hub is getting another influx of federal money. The US Army Corps of Engineers has awarded a $139mn construction contract to Great Lakes Dredge & Dock, to support phase 3 of the dredging project from west of La Quinta Junction through the Chemical Turning basin in the Port's Inner Harbor.
 
What’s next
US refiners may choose to increase foreign imports of sour crude like Russian Urals to replace lost Mars volume, while other traders expect to pull from storage. Values for heavy sour Canadian grades like Cold Lake and Western Canadian Select (WCS) have also increased roughly in line with Mars at the US Gulf coast on the possibility of being blended with lighter grades to create a Mars substitute.

Meanwhile, the spread of Covid-19 and new variants continues to create uncertainty around demand recovery, especially in Asia-Pacific. But demand has recovered sufficiently to put the oil market in a "much healthier place,” the chief economist at trading firm Trafigura said. The company is sticking to its bullish forecast for oil prices to potentially hit $100/bl late next year, despite the risk of Covid-19 headwinds, as the northern hemisphere winter takes hold.
 
Come back again next month for our take on how US crude is competing in global markets while participants still navigate a murky Covid-19 outlook. Until then, we wish you smooth sailing in these choppy waters.

Senior Reporters Amanda Hilow and Eunice Bridges

 

Leave a reply

Required
Please fill in your name
The name is not correct (only letters allowed)

Related blog posts

31 August 2021

The US Crude Export Chronicles: August 2021

Monthly data continued to give us whiplash, with a surprise jump in US crude exports to roughly 3.5mn b/d in June as a wider WTI-Brent spread opened the door for more deals. Hurricane Ida also knocked out deliveries at the Louisiana Offshore Oil Port.

Filter:

Crude oil North America English

29 July 2021

The US Crude Export Chronicles: July 2021

US crude exports are facing serious headwinds this summer including a tight Brent-WTI spread and a looming boost in supply from the Opec+ group of nations. And monthly data has been showing unusual volatility.

Filter:

Crude oil North America English

18 June 2021

The US Crude Export Chronicles: June 2021

US crude exports bounced back above 3mn b/d in April with the Netherlands as the top destination, and India at number two. Meanwhile Fob WTI hit an 18-month high against Ice Brent.

Filter:

Crude oil Oil products North America English