U.S. to Become the Top Oil Exporter to Asia?

Asian oil refineries required more crude oil to meet the growing demand, while the U.S. crude oil producers are seeking for new markets, said Unipec, a Chinese oil trading company, on the APPEC held in Singapore in late September. U.S. is likely to become the top oil exporter to Asia.

The crude oil export from the Middle Eastern countries will probably reduce as the local oil producing countries are working on the deep-processing of oil locally. African oil producing countries are faced with geopolitics risks. As a result, the crude oil made in America, including the oil sand from Canada and deep-water crude oil from Brazil, will become on the key crude oil sources for Asian countries including China. According to Unipec, the U.S. will become the second biggest light crude supplier for China before 2020, supplying over 1 million barrels per day of crude oil. Asia is expected to the biggest crude oil export destinations for U.S. crude oil. The U.S. exported 190,000 barrels of crude oil to China per day during H1, 2017. The number was respectively 30,000 barrels per day to Japan, Singapore and South Korea and 10,000 barrels per day to India, Malaysia and Thailand. These countries presented intentions of purchasing more crude oil from the U.S.

However, crude oil resources are of different qualities in the shale oil producing regions of the U.S. Asian users complained that the oil products produced by U.S. crude oil and condensate could not fulfil the expected quality. They had to blend other crude oil sources in order to guarantee stable quality. Yet the uneven quality is not the only issue. U.S. sellers prefer to sell spots in order to get arbitrage fast. Asian purchasers usually book the crude oil shipments three months in advance, so as to ensure the stable supply.

About 2/3 of the imported crude oil in Asia come from the Middle East at present. The import volume of sour crude reaches about 14 million barrels per day, of which 4.7 million barrels come from Saudi Arabia. Generally, these resources could not be resold. The crude oil imported into China mainly flow into the designated pipelines. Asian oil refiners do not operate flexibly enough, but they are making some changes. U.S. companies are seeking for new business opportunities. Chevron said their products could meet the quality requirement of the purchasers. Trafigura believed that it had become the biggest oil exporter in the U.S. Shell preached that they could export crude oil through most ports in the U.S.

Most oil refining units are designed to processing heavy sour crude oil in Asia but they could also accept the light low-sulfur crude oil from the U.S. The demand for gasoline and petrochemical feedstock grows fast in Asia. Gasoline, diesel and fuel with low sulfur contents are required according to the new standards. U.S. crude oil could meet the above-mentioned demand. China’s and India’s crude oil demand has increased by over 500,000 barrels per day in total in the past few years. The U.S. crude oil production is estimated to grow by at least 500,000-1,000,000 barrels per day in the next few years if the crude oil price is acceptable. Then the U.S. crude oil export volume will increase from the current 800,000 barrels per day to 2,500,000 barrels per day in 2020.

Some integrated refineries have made unit reform in order to process light crude oil. U.S. crude oil is a good choice for refineries, without enough hydrogenating capacity, to produce low-sulphur products. The refining capacity expansion plans are mainly on paper temporarily without great uncertainties. That is to say, it’s possible for Asian refiners to process light crude oil with simple units. U.S. crude oil can produce low-sulphur bunker fuel after blending, which will be needed in the world since 2020. However, not all the players favor U.S. crude oil. For example, the CEO of ESSAR said that they preferred thickened oil made in Venezuela rather than U.S. light crude oil, since they could process thickened oil at their own coking plant.