American crude production has gone from strength to strength in recent years, despite a recent slowdown. After a low of 5 mbd in 2008 and worries about the dependency of the US on imports, the shale revolution massively increased production capabilities over the last decade. The EIA saw crude production at 13.5 mbd last week, a new record. Average production so far this year is 13.2 mbd, up from 12.8 mbd over the same period last year. A possible Trump presidency is seen as being supportive of even greater oil production. Trump has pledged to roll back restrictions on drilling and permitting which were implemented under the Biden administration, as well as to streamline deregulation and end any EV mandates or green energy incentives.
Growing US crude production has been a boon for crude tanker markets. Seaborne exports increased by on average 400 kbd annually between 2013 and 2023, going from a measly 64 kbd to 4 mbd. A large share of this crude went into ARA and the Far East, providing a steady tailwind to tonne mile demand. In the same period, however, seaborne imports shrunk from 5 mbd to 2.8 mbd, with the share of Venezuelan and Middle Eastern crude shrinking markedly. This has left mostly short haul imports from the rest of the Americas.
This year has bucked this trend, with exports essentially flat and imports up slightly from 2023, despite growing production. The divergence is largely explained by growing refinery utilisation and resulting CPP exports, which increased from 2.28 mbd in 2023 to 2.48 mbd so far this year. Refilling of the US SPR has also played a role, growing by 30 mln bbls (as of October 11th). In the long term, the IEA is forecasting oil production, which includes NGLs, to grow from 19.44 mbd in 2023 to 21.5 mbd by 2030. Meanwhile, demand is expected to peak at 20.41 mbd in 2025 and then decline to 18.91 mbd by 2030. This leaves a growing supply and demand imbalance, of which most will be destined for long haul export on tankers.
Recent reports indicate that WTI crude originating in Texas and New Mexico, which accounts for nearly all recent production growth, is getting lighter, decreasing its popularity with refiners. This could lead to a greater blending requirement with heavier grades before any processing into clean products can occur. A sizeable share of imports of Medium and Heavy grades has traditionally come from Mexico and Canada. However, as recently highlighted in one of our reports, imports from Mexico are at its lowest point in over 10 years and will likely continue to decline due to decreasing production and the ramp up of the Dos Bocas refinery. This lack of Mexican supply of heavier grades could result in growing imports from Canada or further afield, a potential further tailwind for tanker tonne miles. If USWC refineries replace heavy AG grades with TMX crude, more Middle Eastern crude could find its way into the USG.
Overall, ever-growing US oil exports seem unlikely to slow down anytime soon. If the IEA forecast of increasing production and a slowdown in consumption comes true, it is possible that the pace of export growth will increase going forward. As demand growth is strongest in East and Southeast Asia, this would largely benefit long haul trade on VLCCs. Further policies implemented by a possible Trump administration could add fuel to the fire, though with global crude supply already looking to outstrip demand in 2025, this remains to be seen.
Data source: Gibson Shipbrokers