This week the Energy Information Administration (EIA) forecasted that US oil demand will rise at 18.7 million barrels per day this year and 18.9 million barrels per day in 2013, making the country once again the world's leading oil consumer. Furthermore, the EIA expects that after the economy regains its balance, demand will only fluctuate between 21 and 22 mill b/d through 2025. In its latest weekly report, Mcquilling Services mentioned that "by unlocking previously unrecoverable shale reserves an ominous cloud is forming over the tanker market, as technological advancements have boosted domestic crude oil production. As a result, demand for seaborn imports is being reduced. The EIA recently placed US domestic crude production in March at 6.26 mill b/d, which is the highest level since July 1998. Throughout the rest of the year production is expected to reach 6.3 mill b/d, an anticipated year-on-year rise of roughly 15%. In its latest Short-term Energy Outlook, the agency forecasts that in 2013 US crude production will further rise to an average 6.7 mill b/d. Although oil prices have entered a seemingly bottomless tailspin, a reported breakeven point of around $50 per barrel should allow US domestic production levels to remain high for the time being", McQuilling said.
It went on to mention that "developments in domestic crude oil production and the increase in the number of pipelines in operation and planned have altered the crude import picture strongly in the past years, impacting some traditional tanker routes. For example, between March 2007 and 2012, import volumes from Nigeria declined by nearly 75% to 10.5 mill barrels (340,000 b/d). This was equivalent to 12% of total US imports, which fell to 4% in March of this year. This equates to the reduction of 37 Suezmaxes on a Nigeria to Loop voyage, McQuilling said. During the same time period, Canadian crude imports to the US rose to an all-time high of 76.4 mill barrels (2.5 mill b/d) while Saudi volumes have held comparatively steady at 42.5 mill barrels (1.4 mill b/d).
Demand for US seaborn imports will remain under pressure for the foreseeable future. Some industry participants have forecast that the the country could stop importing light and medium sweet grades by as early as 2013 or 2014 and that heavy crude will primarily be sourced from Venezuela and Mexico. However, in the near term, logistical factors should keep something of a floor under imports after the recent round of refinery rescues in the Atlantic Basin. However, the viability of these operations will influence the stability of these rescued assets", McQuilling mentioned.
It added that "the reduced demand for overseas crude is already visible in recent EIA data.
Imports into PADD 3 have averaged 5.8 mill b/d or 15% below 2008 levels while PADD 1 averaged 1.5 mill b/d some 10% lower than the same time period. Although the recently healthy refinery utilisation of 92.6% of capacity (highest level since August 2007) has helped absorb some barrels, the tanker market will continue to come under pressure, McQuilling warned. The natural solution has been to look East but even non-OECD nations are not immune to the pressures facing the global economy.
A narrowing spread between WTI and Dated Brent may help draw some import volumes back to the US, but until it returns to a palatable level, the rising competition from intercontinental crude flows are likely to negatively impact US demand for tankers well into the future.
In addition, abundant supplies of natural gas will also reduce oil demand as substitution continues", McQuilling concluded.
Nikos Roussanoglou, Bunker Ports News Worldwide