The Daley Note: June 8, 2023
US exports of crude oil are booming, and nearing a key threshold that could trigger big changes in oil market dynamics, according to East Daley Analytics’ Crude Hub Model.
Crude oil exports hit a record high of 4.81 MMb/d in March 2023, according to the latest Energy Information Administration (EIA) data, up a staggering 82% since the start of 2019. Higher shale production is mainly fueling the US export machine, but there are other supportive factors: domestic refining capacity is falling, lowering US consumption of crude oil, while geopolitical disruptions have increased international demand for US oil.
The three primary Gulf Coast export hubs are Corpus Christi, Houston and Louisiana. Of these, Corpus Christi has been the clear destination of choice over the last four years. Outbound crude oil shipments have more than tripled since 2019 (see red line in figure), accounting for ~75% of the growth in the EIA data (~1.6 MMb/d). Midstream companies such as Enbridge (ENB), Buckeye, EPIC Midstream, and NuStar (NS) operate the largest docks and account for nearly 80% of outbound crude oil shipments, according to the Crude Hub Model.
The Port of Corpus Christ (POCC) has several advantages over competing ports, including an attractive position along the Gulf of Mexico that faces less ship traffic than the Houston Ship Channel. POCC docks also can load larger vessels with less need for reverse lightering services, while buyers can source a “clean” Permian or Eagle Ford barrel that isn’t diluted by other North American crude qualities.
Rapid growth is now filling infrastructure to the Corpus Christi hub and nearing an important threshold. Utilization rates on Corpus-bound pipelines have increased from mid-70% one year ago to 90% as of March 2023, according to the Crude Hub Model.
The 90% threshold is a key level for pipeline operators and shippers. Crude oil pipelines are restricted from offering committed service on more than 90% of the total pipeline capacity, leaving 10% for walk-up (uncommitted) service. Uncommitted services usually transport crude at rates 2-4x higher than a committed service, making marginal shipments less economical.
As Corpus-bound pipes continue to operate near 90% utilization, East Daley models incremental supply from the Permian and Eagle Ford will make its way into the Houston market, where Enterprise Products (EPD), Energy Transfer (ET) and Magellan (MMP) control most of the export capacity. The Corpus Christi hub could maintain its market share and continue growing volumes, but it will require new infrastructure.
Next week, East Daley will review options to expand pipeline capacity into Corpus Christi. For an updated outlook on all crude oil egress pipelines and docks across North America, access East Daley’s latest Crude Hub Model dashboard on Energy Data Studio. – AJ O’Donnell Tickers: ENB, EPD, ET, MMP, NS.
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Review the Year Ahead in Dirty Little Secrets
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Dirty Little Secrets reviews the outlook for Midstream and commodity markets in 2023 and the years ahead. East Daley discusses the outlook for crude oil, natural gas and NGLs and the impacts to midstream assets in our 2023 Dirty Little Secrets annual market report. Click here for a copy of the 2023 Dirty Little Secrets report.
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