The American Petroleum Institute’s (API) industry outlook for 3Q18 shows that the US celebrated another new record for crude oil production of 10.8 million bpd over the past two months.
However, US petroleum exports decreased by 1.3 million bpd since June. The US’ overall petroleum trade balance went from net imports of 2.9 million bpd in June to 4.54 million bpd in August, which is more than a 56% increase in two months.
“Placing constraints on exports of American-made energy works against America’s energy future,” said API Chief Economist Dean Foreman. “While the picture is still a bit muddied, it seems to be getting clearer – the trade war appears to be limiting the United States’ access to crude export markets. As we produce more energy here at home, the US needs markets for its products in order for our economy to continue to grow. There’s no question that the 1.6 million bpd increase US petroleum net imports, which undid a full year’s worth progress, is a setback to the United States’ goal of energy dominance.”
The administration’s trade and tariff policies involving steel that the energy sector relies on are also raising concerns for the API. Prices of many tubular and specialty steel products, which are main inputs to pipelines, refineries and natural gas liquefaction and petrochemical facilities, increased by more than 25% as import tariffs were recently imposed on them.
The API’s report also addresses key uncertainties for the economy and energy markets. It notes remarkable progress in production so far this year, but headwinds with lower consensus growth expectations, rising price inflation, interest rates, trade barriers and disputes, and financial market uncertainties – and a flight to safety in the US dollar that could trigger global credit downgrades.
Global oil markets appeared at a slight deficit in 3Q18, without further OPEC actions. With Asia Pacific accounting for the largest growth in US petroleum exports this year, the recent drop-off in US petroleum exports warrants monitoring, according to the API.
US natural gas quietly achieved 12% annual growth in 3Q18, but appears demand was limited by potential coal and nuclear power subsides, global LNG market conditions, escalating trade disputes, and improved competitiveness by renewables.
Separately, the latest API Monthly Statistical Report (MSR) showed a record 18 million bpd of refined products produced for the month of August. US liquid fuels production remained up by more than 2.0 million bpd year-over-year in August, and the US continued to supply virtually all global oil demand growth and compensate for production losses in some OPEC nations.
In August, US petroleum demand, led by motor gasoline, distillate and refinery feedstocks, grew by 250 000 bpd from July to 20.8 million bpd. This was the strongest demand for any month since August 2007 and reflected solid economic growth, industrial activity, and consumer confidence.
“The backdrop for petroleum demand and the end of the summer driving season appeared to be solid in August, and indicators of the business climate, consumer sentiment, and employment conditions were strong,” said Foreman.
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