Daily Energy Report
US crude exports, India’s emissions surpass Europe’s, Oil price slips, Texas grid strained, Russian refining capacity, Net Zero fantasies, Car companies react to China pressure, Ammonia, and more
Chart of the Day: The Incredible Story of US Crude Exports and its Implications
Figure (1) above shows the trend in US crude oil exports as reported by Kpler. This is only what is classified as crude and doesn’t include condensates. The US had an export ban on crude by a presidential order since 1974. With the increase in shale oil production and the fear of hitting a refining wall since shale oil is light-sweet crude, the industry mounted a powerful campaign to convince the Obama Administration to lift the ban. The ban was lifted in December 2015. But even before that, the industry was exporting small amounts that are classified as “modified condensates” from the industry point of view, but petroleum products from the government point of view (no ban on exports of petroleum products).
Once the US hit a refining wall and US refineries could not take any additional light crude, US crude exports took off breaking record after record. The US is now the third largest crude exporter after Saudi Arabia and Russia.
EOA’s Main Takeaway
While the US crude export story is incredible, it may not be so amazing in contrast to the emerging LNG export story. Regardless, the growth was amazing. This is not only about economics and finance, but also about politics, foreign policy, national security, and the dominance of the US dollar.
US oil demand remained low by historical standards. We attribute the weak demand after the end of the lockdowns to “Work from Home” and “Weak Economic Growth” and possibly a recession that has not been acknowledged officially. We expect that the potential end of work from home (or, at least a significant move back to office work) and an economic recovery will reduce US crude exports and increase imports. This is one of the reasons why we used a polynomial trend instead of a linear trend in the chart above. In short, strong economic growth in the US will lead to a peak in crude exports, despite the crude quality issues that we always talk about.
Since changes in US inventories are also correlated with changes in exports, a peak in exports will lead to lower volatility in inventories.
Story of the Day
For the first time from April to June this year, India's power emissions from fossil fuels surpassed Europe's. Europe reduced its power emissions by 11%. In contrast, India saw a 4.5% rise in emissions due to record coal usage, which accounts for approximately 75% of its electricity generation. India's emissions are projected to consistently surpass Europe's in the near future.
EOA’s Main Takeaway
While we believe that India’s emissions will exceed Europe’s emissions permanently, we also believe that the comparison is NOT accurate and not fair. Most European countries are in a recession. As we established in the past, when countries are in recession, their energy consumption declines and most of that decline comes at the expense of oil, gas, and coal. In other words, during a recession, the share of renewable energy increases. But what will happen when those countries experience strong economic growth? Most of the increase in energy consumption will come from oil, gas, and coal! Emissions increase again!
News of the Day
Oil prices slightly decreased on Thursday due to concerns about China's demand, despite a U.S. report showing strong crude demand. Brent crude futures and U.S. West Texas Intermediate crude futures both dropped by 0.2%. U.S. crude oil stockpiles decreased by 6.3 million barrels in the past week, marking the fourth consecutive weekly drop, as refineries work to meet global energy demands. Potential increased oil production from Iran and Venezuela might offset cuts from Saudi and Russia.
EOA’s Main Takeaway