Europe switching to US oil
As OPEC’s efforts to balance the oil market bear fruit, U.S. producers are reaping the benefits - and flooding Europe with a record amount of crude.Oil from the US has a price advantage over the oil currently used by European refineries. It should grow its business because it is less susceptible to instability in the Middle East and Russian perfidy as a supplier.
Russia paired with the Organization of the Petroleum Exporting Countries last year in cutting oil output jointly by 1.8 million barrels per day (bpd), a deal they say has largely rebalanced the market and one that has helped elevate benchmark Brent prices LCOc1 close to four-year highs.
Now, the relatively high prices brought about by that pact, coupled with surging U.S. output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, traders said.
“U.S. oil is on offer everywhere,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude and has recently started purchasing U.S. oil. “It puts local grades under a lot of pressure.”
In January-April, U.S. supplies jumped four-fold year-on-year to 6.8 million tonnes, or 68 large Aframax tankers, according to the same data.
Trade sources said U.S. flows to Europe would keep rising, with U.S. barrels increasingly finding homes in foreign refineries, often at the expense of oil from OPEC or Russia.
In 2017, Europe took roughly 7 percent of U.S. crude exports, Reuters data showed, but the proportion has already risen to roughly 12 percent this year.
Top destinations include Britain, Italy and the Netherlands, with traders pointing to large imports by BP, Exxon Mobil and Valero.
Polish refiners PKN Orlen and Grupa Lotos and Norway’s Statoil are sampling U.S. grades, while other new buyers are likely, David Wech of Vienna-based JBC Energy consultancy said.
“There are a number of customers who still may test U.S. crude oil,” Wech said.