
(Source: Shutterstock, HartEnergy.com)
The U.S. oil and gas industry is well-positioned to survive and even thrive in a trade war with China, Drillinginfo said in the most recent update to its “U.S. Exports” report.
Sanctions against China and Venezuela have curbed crude oil exports to those countries, but the slack has been picked by increased shipments to India, Japan, South Korea, Taiwan, Singapore, Chile and Peru, among others. If trade talks ultimately result in China adding imports, it would create space for greater production of U.S. crude, Drillinginfo said.
With the domestic market saturated, the added barrels in U.S. crude oil production are and will continue to be exported, Drillinginfo said. Growth is derived from shale plays that produce lighter oils that are a better fit for non-U.S. refiners. The Gulf Coast refinery complex is built to handle heavier crudes, such as those imported from Canada and Venezuela.
“To facilitate this rapid increase in exports, additional infrastructure will be necessary,” the report said, noting that most of this infrastructure will be built in Houston and Corpus Christi, Texas. “Corpus Christi is expected to be the leading point of export moving forward, thanks to its proximity to the Permian and Eagle Ford basins and it being a less congested port.”
The S&P 500 index suffered five straight days of losses and a 3.5% drop for the week ending May 10 as trade tensions rose. The price of oil was steady but the S&P Oil and Gas Production index took a hit on May 10 after the announcement that talks between the U.S. and China had ended.
U.S. exports of oil and petroleum products peaked at 23.95 million barrels in October 2017 but remained strong until July 2018, according to data from the U.S. Energy Information Administration (EIA). Steel tariffs were imposed on Chinese goods by the Trump administration in March 2018. Oil exports dropped to as low as 2.1 million barrels in November 2018.
U.S. exports of LNG to China reached a monthly high of 17.5 million cubic feet (MMcf) in April 2018 but collapsed to zero in September as trade tensions rose. In February, the most recent month tracked by the EIA, the U.S. shipped 3.46 MMcf to China.
While the difficulties in trade talks are unlikely to immediately impact the U.S. oil and gas industry, uncertainty over the effect on the overall global economy could result in short-term harm.
“The escalation in the trade war has put a return in global growth worries, which would translate to softer crude demand,” Edward Moya, senior market analyst at Oanda, told MarketWatch. “Optimism is still greater for a deal to get done soon than for talks to fall apart, so the trade story could shortly become a tailwind for crude.”
Recommended Reading
E&Ps Pivot from the Pricey Permian
2025-02-01 - SM Energy, Ovintiv and Devon Energy were rumored to be hunting for Permian M&A—but they ultimately inked deals in cheaper basins. Experts say it’s a trend to watch as producers shrug off high Permian prices for runway in the Williston, Eagle Ford, the Uinta and the Montney.
Tamboran, Falcon JV Plan Beetaloo Development Area of Up to 4.5MM Acres
2025-01-24 - A joint venture in the Beetalo Basin between Tamboran Resources Corp. and Falcon Oil & Gas could expand a strategic development spanning 4.52 million acres, Falcon said.
Blackstone Buys NatGas Plant in ‘Data Center Valley’ for $1B
2025-01-24 - Ares Management’s Potomac Energy Center, sited in Virginia near more than 130 data centers, is expected to see “significant further growth,” Blackstone Energy Transition Partners said.
Huddleston: Haynesville E&P Aethon Ready for LNG, AI and Even an IPO
2025-01-22 - Gordon Huddleston, president and partner of Aethon Energy, talks about well costs in the western Haynesville, prepping for LNG and AI power demand and the company’s readiness for an IPO— if the conditions are right.
E&P Highlights: Dec. 30, 2024
2024-12-30 - Here’s a roundup of the latest E&P headlines, including a substantial decline in methane emissions from the Permian Basin and progress toward a final investment decision on Energy Transfer’s Lake Charles LNG project.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.