Record Oil Output, Yet Dip in Petroleum Exports Suggests Tariffs’ Effect

Mark Green
Posted August 16, 2018

Lots of positive energy data points in API’s newest Monthly Statistical Report – and one that’s potentially concerning. The good:

• The U.S. tied its record for crude oil production in July at 10.7 million barrels per day (b/d) and set a new one for natural gas liquids, 4.4 million b/d.
• With total liquids production up by more than 2 million b/d compared to July 2017, the U.S. has accounted for almost all of the growth in world oil production so far in 2018 – more than compensating for production losses elsewhere around the world.

Here’s a chart showing U.S. crude oil production:

The bottom line is that America is doing much of the heavy lifting to help stabilize global oil markets.

Now the potential point of concern. The U.S. petroleum trade balance retreated in July, perhaps the result – at least in part – of trade tensions prompted by new U.S. tariffs. Crude export were down 240,000 b/d last month, and refined products exports decreased 220,000 b/d.

It’s only one month, but given the fact U.S. petroleum exports increased in July during 10 of the past 12 years, it bears watching. API Chief Economist Dean Foreman:

“July’s results were only one data point, but when U.S. petroleum net imports had fallen to less than 3 million barrels per day in June, the sudden backsliding of nearly 0.5 million barrels per day in July was material. We need to monitor U.S. petroleum exports carefully in months ahead to determine if the decline highlighted an emerging trend and, if so, whether that tells us something meaningful about U.S. trade relations, the strength of the global economy or global energy demand growth.”

As we’ve said regularly over the past few months as U.S. tariffs policy has developed (see here and here), U.S. energy could be negatively impacted during trade skirmishing. It’s not the path to energy growth and global energy leadership.

Otherwise in the MSR, U.S. petroleum demand in July sustained its highest level in 11 years, 20.6 mb/d, which reflected solid economic activity. However, nearly all demand growth between June and July stemmed from residual fuel oil and, to a much lesser extent, kerosene jet fuel. Foreman:

“This appears to tell us that freight shipping really picked up in July. For residual fuel oil, the change ran contrary to typical seasonal demand and instead suggested an acceleration in marine shipping activity with escalating U.S. trade disputes.” 

Again, click here to view the latest MSR.