U.S. oil exports boom, putting infrastructure to the test

NEW YORK/HOUSTON, Oct 30 (Reuters) - Tankers carrying record levels of crude are leaving in droves from Texas and Louisiana ports, and more growth in the fledgling U.S. oil export market may before long test the limits of infrastructure like pipelines, dock space and ship traffic.
U.S. crude exports have boomed since the decades-old ban was lifted less than two years ago, with shipments recently hitting a record of 2 million barrels a day. But shippers and traders fear the rising trend is not sustainable, and if limits are hit, it could pressure the price of U.S. oil.
How much crude the United States can export is a mystery. Most terminal operators and companies will not disclose capacity, and federal agencies like the U.S. Energy Department do not track it. Still, oil export infrastructure will probably need further investment in coming years. Bottlenecks would hit not only storage and loading capacity, but also factors such as pipeline connectivity and shipping traffic.
Analysts believe operators will start to run into bottlenecks if exports rise to 3.5 million to 4 million barrels a day. RBC Capital analysts put the figure lower, around 3.2 million bpd.The United States has not come close to that yet. A total of the highest loading days across Houston, Port Arthur, Corpus Christi and St. James/New Orleans - the primary places where crude can be exported - comes to about 3.2 million bpd, according to Kpler, a cargo tracking service.
But with total U.S. crude production currently at 9.5 million barrels a day and expected to add 800,000 to 1 million bpd annually, export capacity could be tested before long. Over the past four weeks, exports averaged 1.7 million bpd, more than triple a year earlier.
"Right now, there seems to be a little more wiggle room for export levels," said Michael Cohen, head of energy markets research at Barclays.
"Two to three years down the road, if U.S. production continues to grow like current levels, the market will eventually signal that more infrastructure is needed. But I don't think a lot of those plans are in place right now."
If exports do hit a bottleneck, it would put a ceiling on how much oil shippers get out of the country. Growing domestic oil production and limited export avenues could sink U.S. crude prices.Shippers have booked vessels to go overseas in recent weeks because the premium for global benchmark Brent crude widened to as much as $7 a barrel over U.S. crude , making exports more profitable for domestic producers.
EXPORT PLANS
Exports could hit 4 million bpd by 2022, an Enterprise Products Partners LP executive told an industry event in Singapore recently.
Though some operators are already eyeing expansion plans, there are limitations, said Carlin Conner, chief executive at SemGroup Corp, which owns the Houston Fuel Oil Terminal. SemGroup has three docks for exporting crude and is building additional ones.
"There aren't very many terminals with the needed pipeline capabilities, tank farm capacity and proper docks to load the ships ... Adding this is expensive and not done easily. So there are limitations to unfettered export access," he said.
For instance, exports are expected to start from the Louisiana Offshore Oil Port (LOOP) in early 2018 at around one supertanker a month, according to two sources. The LOOP is potentially a key locale for exports. Its location 18 miles (29 km) offshore means it can handle larger vessels than other, shallower ship channels.While LOOP can load around 40,000 barrels per hour, operating at that capacity is not likely because that same pipe is used to offload imports, the sources added. LOOP did not respond to a request for comment.
In Houston, when looking at the top 30 loading days, crude exports averaged 700,000 bpd, Kpler added. That includes Enterprise's Houston terminal, among the largest of the export facilities, that had 615,000 bpd.
Other terminal operators are also developing additional facilities. NuStar Energy LP currently can load between 500,000 to 600,000 bpd at its two docks in Corpus Christi, which has about 1 million in capacity, according to a port spokesman. NuStar is developing a third dock, which should come online either late first quarter or early second quarter.
In Houston, Magellan Midstream Partners LP is planning a new 45-foot draft Aframax dock for mid-2018. Aframax vessels can carry about 500,000 to 700,000 barrels of crude. (Reporting by Catherine Ngai in New York and Bryan Sims in Houston;

Oil rises on tighter U.S. market, strong China imports

SINGAPORE (Reuters) - Oil prices rose on Friday as both U.S. crude production and inventories declined, pointing towards a tightening market.
Strong Chinese oil import data also supported crude prices, traders said.

With the Organization of the Petroleum Exporting Countries (OPEC) leading a production cut, analysts said that global oil markets were now broadly balanced after years of oversupply.

U.S. West Texas Intermediate (WTI) crude futures were trading at $50.88 per barrel at 0350 GMT, up 28 cents, or 0.6 percent, from their last settlement.

U.S. crude inventories dropped 2.7 million barrels in the week to Oct. 6, to 462.22 million barrels, the Energy Information Administration (EIA) said late on Thursday.

Crude production slipped 81,000 barrels per day (bpd) to 9.48 million bpd.
In international markets, Brent crude futures were at $56.51, up 26 cents, or 0.5 percent.

Strong Chinese oil imports, which averaged 8.5 million bpd between January and September, also supported prices, traders said.

September’s imports were slightly over 9 million bpd, solidifying China as the world’s biggest importer.

“The rebalancing of the oil market has made significant progress over this time, although there is still some way to go to get back to the five-year average,” said William O‘Loughlin, investment analyst at Australia’s Rivkin Securities.

Bernstein Research said that it expected fuel inventories to continue falling, although they added that OPEC would need to extend the cuts beyond the current expiry date in March 2018 to further reduce excess stocks.“OPEC will not achieve normalized inventory levels before cuts expire at the end of March,” Bernstein said, but added that “we believe an extension of cuts through 2018 should allow inventories to reach normalized levels before the end of 2018.”

OPEC, together with other producers including Russia has been restraining output since January. The pact to cut production is set to expire by the end of March 2018, and there are discussions for an extension.

Traders said they were awaiting a decision later on Friday by U.S. President Donald Trump on whether to continue to certify the 2015 Iran nuclear deal.

Trump is expected not to certify the agreement, which has to be re-certified every 90 days and is due for renewal on Sunday.

The step would not withdraw the United States from the deal but would give the congress 60 days to decide whether to reimpose new sanctions.

“U.S. sanctions could cut off a lot of Iranian oil trade finance,” FGE President Jeff Brown told Reuters this week.

“Last time we saw this, it cut off 1 million bpd of supplies. I don’t think it’d be that big this time round, but it would still be significant,” said Brown.

India raises vegetable oil import taxes to protect farmers

NEW DELHI (Reuters) - India, the world's biggest buyer of vegetable oils, has raised import taxes on crude and refined edible oils to protect local oilseed farmers from cheaper imports from top suppliers Malaysia and Indonesia.
The increases were shown in an order uploaded on a government website late on Friday.
New Delhi doubled the import tax on crude palm oils to 15 percent and raised the import tax on refined palm oils to 25 percent, increasing the differential in duty by 10 percentage points to encourage local processing.
The government also raised the import tax on crude soyoil to 17.5 percent from 12.5 percent previously."The decision will help both farmers and the local crushing industry which had to bear the brunt of higher oilseed stocks, lower domestic prices and surging supplies from major producers," said Sandeep Bajoria, chief executive of the Sunvin group, a leading vegetable oil importer. "We welcome the move."
Reuters reported on Tuesday that the government was considering raising import taxes on vegetable oils, the country's third biggest imported commodity after crude and gold.
New Delhi spends about $10 billion a year to import palm oil from Malaysia and Indonesia and relatively smaller quantities of soyoil from Brazil and Argentina.
Large inventories and lower prices have fomented a wave of protests by farmers in the big agrarian states of Maharashtra and Madhya Pradesh, ruled by Prime Minister Narendra Modi's Bharatiya Janata Party.
Nearly two-thirds of India's 1.3 billion people depend on agriculture to scrape a living.

India veg oil imports