US crude oil production up, exports down

While U.S. crude oil production hit a record of 10.8 million barrels per day (MBD) last quarter, petroleum exports have dropped by 1.3 million barrels per day, according to the American Petroleum Institute’s industry outlook for the third quarter of 2018.

The outlook also found that the petroleum trade balance went from net imports of 2.9 MBD in June to 4.54 MBD in August — a 56 percent increase.

The Trump administration’s tariffs on steel are causing concerns for the energy sector. Prices of steel products used for pipelines, refineries and natural gas liquefaction and petrochemical facilities increased by more than 25 percent due to the import tariffs.

“Placing constraints on exports of American-made energy works against America’s energy future,” API Chief Economist Dean Foreman said. “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 U.S. needs markets for its products in order for our economy to continue to grow. There’s no question that the 1.6 MBD increase U.S. petroleum net imports, which undid a full year’s worth progress, is a setback to the United States’ goal of energy dominance.”

Further, while production is up, growth expectations are muted going forward due to rising price inflation, interest rates, trade barriers & disputes, and financial market uncertainties. Also, a flight to safety in the US dollar could trigger global credit downgrades.

Asia Pacific accounted for the largest growth in U.S. petroleum exports this year.

Additionally, U.S. natural gas saw 12 percent annual growth in Q3, but demand was limited by potential coal and nuclear power subsidies, global market conditions, escalating trade disputes, and competition from renewables.

Petroleum demand, led by motor gasoline, distillate and refinery feedstocks, grew by 250 thousand barrels per day in August to 20.8 million barrels per day. This was the most demand for a single month since August 2007.

“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,” Foreman said.