A burgeoning surplus of light crude oil is setting the stage for exports to take off, according to ESAI Energy’s recently released North America Watch. As new pipeline capacity takes Permian crude to the Gulf Coast, the USGC will be flooded with light crude, weakening Gulf Coast prices for light crude. Domestic refiners will process more light crude at lower prices but within limits. U.S. exports will certainly go higher, but how high will depend on availability of dock and loading space as crude exports compete with refined product exports and whether enough there is enough light demand in foreign markets to absorb the U.S. surplus.

Midstream investments are catching up to the rising output from Permian. By the end of this year about 730,000 b/d of new pipeline capacity will come online, taking Permian crude to the Gulf Coast for refining and export. By 2019, another 840,000 b/d of pipeline capacity is planned to take Permian crude to Corpus Christi. At Gulf Coast marine terminals, investments in additional deep-water docks, loading facilities, storage, and connecting pipelines are also taking place in anticipation of the expanding volumes reaching Houston, Beaumont-Port Arthur, and Corpus Christi. U.S. shale production growth continues to be dominated by the Permian Basin, where ESAI Energy projects output of light tight oil will be 460,000 b/d higher in 2017 than the prior year, and will grow by another 340,000 b/d in 2018.

Elisabeth Murphy, analyst at ESAI Energy points out that “Although we see that the USGC surplus could rise to 2.0 million b/d next year, its disposition is unclear. Lower prices will adversely impact the rate of growth coming from shale production.”
Source: ESAI Energy