US becomes a major oil supplier to Europe

Oil supply availability for European oil refiners has changed substantially due to higher volumes of US grades being sold in the region, in some cases for the first time. Significantly, the volumes of US crude being exported to Europe have surpassed the volumes loaded for the key BFOET crude oils. These changes have introduced an increase of WTI-linked pricing to a region that has historically bought crudes linked to Dated Brent.

In January 2016, total exports of US crude to Europe were just 43,000 barrels per day. However, by September 2019, US exports had reached 907,000 barrels per day. Bloomberg data shows that total volumes of crude loaded for BFOET grades was 860,000 barrels per day in September 2019. Twelve months earlier, total US exports to Europe were 580,000 barrels per day with BFOET (loaded volumes) around 1 million barrels per day.

There are four European countries that have emerged as significant buyers of US crude oil. In the first eight months of 2019, US crude oil exports to France, Italy, the Netherlands and the United Kingdom were 637,000 barrels per day, an increase of 144% from 2018. US exports reached just shy of 1 million barrels per day in January 2019. In late 2018 Argus Media had stated that US crude oil imports into Europe could reach 900,000 barrels per day, by the end of 2019 and would surpass the combined BFOET production³. The latest EIA data indicates that this level could be within reach on a sustainable basis.

In late 2018, to capture the growing influence of non-North Sea grades in Brent, Argus Media began assessing their own dated Brent price to sit alongside their existing Brent assessment. The assessment referred to as “new dated Brent” is using delivered grades of other light, sweet crude grades, such as WTI⁴ as well as Mediterranean and Caspian crudes.

WTI was the largest US grade exported to the UK, Netherlands and Italy in 2018 according to data from Kpler. Their analysis shows that, of total US crude import volumes, WTI accounted for 38% of total US imports into Europe followed by Midland and Eagle Ford.

The role of the US in the global crude oil market has increased, driven in part by higher volumes of exports. European markets have been a major importer of key US grades and volumes have risen to levels that have started to rival the production of the key grades that underpin the European crude oil benchmark Dated Brent. These changes position the US to challenge for a greater share of WTI-linked pricing outside North America.

1. Surging US Crude Exports Increase WTI’s Influence on Global Pricing https://www.cmegroup.com/education/articles-and-reports/surging-us-crude-exports-increase-wtis-global-pricing-influence.html
2. BP Statistical Review of World Energy 2019 https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2019-full-report.pdf
3. Surging US Crude exports increase WTI’s global pricing influence. http://view.argusmedia.com/New-North-Sea-Dated.html
4. Argus Media: Dated Brent assessment includes delivered grades https://www.argusmedia.com/en/press-releases/2018/argus-launches-cif-rotterdam-crude-prices