This is the February 2017 edition of our North America Quarterly, covering all important aspects of the region, with a particular focus on the growth of US production and its impact on regional and global balances for both crude and products. The Quarterly is designed to be the most comprehensive guide to US and Canadian production, midstream projects, US and Canadian crude balances, regional differentials, and the US refining industry.
This edition also debuts our new North America Quarterly – Data Supplement, which contains production, demand, refining, trade, inventories, balances, and pricing data for the United States, Canada and Mexico. This data set augments the focus and outlook pieces by providing a more exhaustive and detailed look at key metrics in each region and the historical data will also be available for download from the website for all our data subscribers.
Inside this edition:
- In Focus: Trump’s pro-energy policies could support US crude exports moving forward. Congress has already taken measures to reverse rules imposed by the Obama administration which would have cost producers $385-466 million per year in the future. In addition, the start-up of DAPL could allow 0.3 mb/d of exports of Bakken crude. While the market focuses on the Border Adjustment Tax (BAT), the probability of this passing congress is not a given.
- In Focus: Light sweet crude in the US and Canada is set to grow by nearly 0.4 mb/d this year. Much of this will be exported, but some will need to be absorbed by the USGC refinery fleet. In theory, the USGC could switch into 0.61 mb/d more light sweet crude compared to November 2016 levels. However, the price incentive to make this switch is still some way off. In this piece, we evaluate USGC switching economics and historical instances of switching, and assess the impact of rising DSW, WTI-Midland and Bakken availability on this dynamic.
- Outlook for crude: Constraints in processing light shale crude suggest the US market will be balanced mainly by exports this year. A wider WTI-Dubai spread is already incentivising this, and cargoes of Permian crude have headed east. However, in order to clear supply growth this year, US grades will need to maintain steep discounts to international benchmarks.
- Outlook for products: A cold winter and surging petrochemical demand is supporting LPG prices. But, we assert that even after winter demand fades, in order to restock diminishing US inventories, US LPG prices will have to remain high through Q2 17 to shut off the export arb to the east.
- Outlook for crude production: Tight oil is not the only expected source of production growth in the US. The market is also expecting another year of strong Gulf of Mexico production growth. However, this ignores rising underlying decline rates. Despite identifying several tiebacks, we expect GoM output to likely decline this year by 15 thousand b/d.
The North America Quarterly also provides a detailed regular update on pipeline projects, rail capacity, US PADD by PADD crude balances, Canadian regional crude balances, US, Canadian and Mexican regional refinery slates, Canadian crude balances, product demand and cracks, crude imports by grade, shale plays by basin, US independents hedging activity in 2015 and 2016, and the latest production data, including rig counts, and technological and regulatory developments affecting the domestic oil industry.