Americas News
Unstoppable U.S. Shale Could Benefit Caribbean Oil Storage as Output Tops 10 Million BPD
In a sector defined by conflicting analytical forecasts and price gains swayed by rhetoric rather than logic, only one thing seems certain: the U.S. shale juggernaut is unstoppable, as evidenced by U.S. Energy Department monthly data showing that the Americans broke 10 million barrels per day (bpd) for the first time in 48 years in November.
And while breaching this threshold has been something many analysts have feared would upset the delicate supply/demand balance supposedly being achieved by the Organization of the Petroleum Exporting Countries (OPEC) via its production cuts, the U.S. boom may benefit offshore entities, including storage terminal operators in the Caribbean.
According to Sandy Fielden, director of research and commodities for Morningstar Inc., rising U.S. crude supply could offset the lack of Venezuelan oil stored at these facilities, which can accommodate over 140 million barrels of crude and refined products.
Kurt Barrow, an analyst at IHS Markit, pointed out, "The bulk of the Caribbean storage facilities have always been used for transshipment," particularly for building bulk, which would be of interest to U.S. crude exporters.
Meanwhile, another IHS Markit analyst, Daniel Yergin, said the U.S. exceeding the !0 million bpd output "is significant in market terms, and it's very significant psychologically: the U.S. is back big time as an oil producer and could be by next year the largest in the world.
"We're one of the big three now, and we could be number one."
Certainly that seems to be the goal of energy producers: Exxon Mobil will reportedly triple its production of oil and chemical feedstocks in the Permian Basin and expand regional infrastructure by 2025; this comes on the heels of Exxon announcing it will increase its U.S. investments to $50 billion over the next five years, thanks to U.S. president Donald Trump's tax reforms.
Although the Americans have repeatedly been singled out by their own media as the heavies bent on ruining the carefully laid plans of OPEC, it's worth noting that the cartel's output rose in January from an eight-month low as higher output from Nigeria, Libya, and Saudi Arabia offset a further decline in Venezuela.
A Reuters survey shows that OPEC pumped 32.4 million bpd last month, up 100,000 bpd from December.
If the Americans are establishing themselves as the clear winners in the 2018 crude market, it seems the clear loser this year - at least in North America - is Canada: a new IHS Markit report forecasts that capital spending in that country will drop below $10 billion this year, for the first time since 2004.
IHS Markit also doubts there will be an eventual return to robust spending, due to a constrained pipeline system that can't keep pace with growth, and shifting marine fuel specifications that could further reduce the price received for heavy crude.
If nothing else, the Americans are keeping analysts on their toes: earlier this week reports of rising U.S. production caused a host of experts to predict that $70 oil will soon evaporate.
