Daily Energy Report
US oil imports, oil prices and energy security, loss of industrial base in Europe, Russia, Saudi Arabia, LNG, and more
CHART OF THE DAY: Bullish for oil
US Crude Oil Imports by Source
The chart above is related to five topics we discussed in yesterday’s Daily Energy Report: 1) US pipeline regulator ordering TC Energy to lower the operating pressure in the Keystone pipeline, 2) the OPEC Secretary General emphasizing that the OPEC+ production cut will remain until the end of 2023, 3) the reintroduction of NOPEC legislation in the Senate Judiciary Committee, 4) labor strikes in France affecting the energy sector, and 5) expansion of capacity of crude oil exports in Texas.
The chart shows US crude oil imports— mostly medium and heavy sour— by source. It also reveals that most imports are from Canada and that the US dependence on imports from OPEC is about 18%.
EOA’s Main Takeaway:
Reducing pressure in the Keystone pipeline is a reminder that any reduction in Canadian crude flows must be compensated for by imports from other countries, simply because the tight oil plays deliver light crude and condensates that cannot replace Canadian crudes. Most of the production additions from the tight plays have been condensates. Since US refineries have reached a refining wall and cannot take any more super light crude and condensates, all additions must be exported, with some undergoing blending, which is one of the reasons for the increases in the adjustment factor in the Energy Information Administration’s weekly reports. So, from where can the US import oil in the event of disruptions in crude flows from Canada?
Venezuela’s exports are not steady, while the rest of Latin America’s producers have maxed out their output. OPEC, in its turn, is not willing to raise production, and any increases will come from Libya and Nigeria which produce light sweet crude—the type which the US does not want to import
Labor strikes, meanwhile, imply lower supplies and an increase in demand, more competition for available resources, or even both.
The only source left is OPEC, mainly Saudi Arabia and the UAE. But why should they cooperate with the US when there is a legislation in the Senate and Congress to sue them in US courts?
The problem, as shown in the chart above, is that US dependence on OPEC is low, yet the US needs the oil group whenever there is a crisis and energy security is of prime concern.
The bottom line is that the global oil market is interconnected, and throwing a wrench in the middle of it causes chaos. Now guess who is throwing that wrench!
STORY OF THE DAY
Speira Gmbh, a European aluminum smelter, has announced that it is planning to shut its Rheinwork plant in Germany later this year citing challenges in the energy market. Bloomberg said that "follows a 50% cut in aluminum production announced in September as soaring power and gas prices plunged Europe’s energy-intensive metals industry into an existential crisis."
EOA’s Main Takeaway: