Atlantic basin exports of oil mainly driven by the US and Russia have remained strong, and the star of the show for these players remains crude. Seaborne crude exports from these countries show a m-o-m growth in April, when compared to other products including diesel which make up for the overall decline from both regions. The question that remains to be answered is: will these levels of crude exports be sustained going forward?
Domestic demand to keep a check on US exports
Firstly, moving our focus towards the US, what stands out is the record high level of seaborne crude exports in March and April at 4.5mbd for both months. These record high flows were driven by European demand in March but by April the loadings shifted toward Asia. This is mainly due to Chinese buying to replenish onshore inventories as well as to supply the refineries which are expected to come out of planned turnarounds in June.
At the same time, U.S. refineries are coming out of maintenance season (planned and unplanned) with utilisation already reaching nearly 91% nationwide and 95% in PADD 3 (EIA), from where most oil product exports originate.
A decline m-o-m in exports of refined products, especially diesel/gasoil, can be attributed to slowing demand in traditional markets such as LatAm along with Russia making inroads to that diesel import market, taking a portion of the market share from long time suppliers in the USGC. Although gasoline exports are slightly up m-o-m, they are down 11% y-o-y. Considering PADD 1 gasoline stocks are below the five-year range, as we move closer to summer driving season, more barrels are likely to stay within the domestic market.
Russian exports face an oversupplied market
Now, let’s move our focus towards Russia which is responsible for the other significant chunk of Atlantic basin oil exports primarily via the Baltics and Black Sea. Similar to the US, multi-year-high oil exports led by crude were observed from Russia in both March and April. Although total oil exports declined in April, crude exports have managed to continue a 100kbd m-o-m growth reaching 5.3mbd in April.
Russian seaborne crude exports have managed to remain strong despite Western sanctions mainly due to buying from a few friendly markets, such as India and China. The share of Russian crude in India’s imports has surpassed the Middle East’s share in April. Coming to products, this is where Russia has struggled to place its barrels apart from diesel/gasoil which Russia is exporting to newer markets in Africa and LatAm. As domestic consumption re-emerges after the winter break, while the refinery maintenance season ramps up, exports of Russian diesel are widely expected to decline significantly in May.
Balances paint a clearer picture
Looking at Atlantic Basin net-exports of crude, seasonality is set to play a crucial role. As seen in the chart above, net exports are trending downward but with levels well above the historical average as well as levels seen last year. As various factors such as economic slowdown and refinery turnarounds put further pressure on crude exports going forward, Chinese crude imports remain the key swing factor. Buying levels from Chinese refiners in the second half of 2023 will decide whether these Atlantic Basin barrels will hit the export markets in the coming months or not. A general slowdown in oil products, recessionary fears, and an oversupplied market since Q4 2022 make the current levels of exports seem more and more unlikely for the second half of 2023.