Soaring US Exports to Derail Crude Recovery

Soaring US Exports to Derail Crude RecoverySoaring US Exports to Derail Crude Recovery

The US is exporting crude oil at a record pace with no signs of slowing down, which has the potential to unbalance a global oil market in recovery, energy expert Tom Kloza said.

"The exports are what we need to focus on through the next 30 days," Kloza, co-founder of the Oil Price Information Service, told CNBC.

High US production can decide how oil prices trade in the second half of this year and through 2019, he added.

Domestic exports have not dipped below 1 million barrels a day since late November, as US oil producers fill the void left by reduced capacity from Mexico and Venezuela. Higher demand for petroleum and gasoline in South America has also boosted appetite for North American oil.

US crude oil exports rose to 2.17 million barrels per day, or more than 15 million a week, at the end of March. That marked its highest level on record.

"We think that number is going to go up to probably 20 million or more [a week], get to maybe 2.5 million barrels a day," said Kloza.

"The United States is in essence going to be exporting more than the UAE, Kuwait, Nigeria, those individual countries. Rising US production and exports comes at a time when other oil producers are ramping up their own activity."

Russia recently had "the highest output in about 11 months and there are hints that maybe they're not going to be in this long-term supply cutting agreement with the Saudis," said Kloza. On top of that, "we are going to see higher production from Kazakhstan, from Brazil, from the United States and from Canada."

Global oil production may put a dent in the progress made the Organization of Petroleum Exporting Countries in correcting a supply-demand imbalance. In 2016, OPEC and some non-OPEC members had agreed to limit production to rebalance oil markets after their late-2014 plunge.

Crude oil is "the ultimate macroeconomic product", Kloza said, stressing that major banks like Morgan Stanley and Goldman Sachs estimate oil could top $70, which is "priced for pure perfection".

Still, a number of headwinds are developing to keep crude's gains curtailed.


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