API: US petroleum net imports increased strongly on falling exports

The US has reached a new record for crude oil production of 10.8 million b/d over the past 2 months, but petroleum exports decreased by 1.3 million b/d since June, according to a recent industry outlook for the third quarter from the American Petroleum Institute. The nation’s overall petroleum trade balance went from net imports of 2.9 million b/d in June to 4.54 million b/d in August, which is more than a 56% increase in 2 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 US’s 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 b/d increase US petroleum net imports, which undid a full year’s worth progress, is a setback to the US’s goal of energy dominance.”

Also raising concern are the Trump administration’s trade and tariff policies involving steel on which the energy business relies. 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 on them were recently imposed.

The third-quarter report also addresses key uncertainties for the economy and energy markets:

• Remarkable progress in production so far in 2018, 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 the third quarter, without further actions from the Organization of Petroleum Exporting Countries. With the Asia-Pacific region accounting for the largest growth in US petroleum exports this year, the recent drop-off in US petroleum exports warrants monitoring.

US natural gas quietly achieved 12% annual growth in the third quarter, 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 b/d of refined products produced for the month of August. US liquid fuels production remained up by more than 2 million b/d 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, increased by 250,000 b/d from July to 20.8 million b/d. 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.