
(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&P Highlights: Feb. 10, 2025
2025-02-10 - Here’s a roundup of the latest E&P headlines, from a Beetaloo well stimulated in Australia to new oil production in China.
Ring May Drill—or Sell—Barnett, Devonian Assets in Eastern Permian
2025-03-07 - Ring Energy could look to drill—or sell—Barnett and Devonian horizontal locations on the eastern side of the Permian’s Central Basin Platform. Major E&Ps are testing and tinkering on Barnett well designs nearby.
Subsea7 Awarded Contract for Gas Field Offshore Turkey
2024-12-30 - Subsea7 will provide inspection, repair and maintenance for the Sakarya field.
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.
E&P Highlights: Feb. 3, 2025
2025-02-03 - Here’s a roundup of the latest E&P headlines, from a forecast of rising global land rig activity to new contracts.
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.