So where will all this crude go? And at what price?
In the near term, the US will look to Europe to absorb most of its crude volumes. Refining values are higher in Europe and transport costs are lower. But US crude grades will be fighting African Bonny Light for European market share, so US crudes will need to be discounted to stay competitive. The marginal barrel will then shift to Asian markets in 2022, once European demand is sated. Higher transport costs to Asia will require even further discounts to capture market share.
Contrary to a widely shared view that condensates will comprise the majority of US exports in the next five years, we expect them to account for just 25% of exported volumes by 2023. Questions about specific crude streams will arise for US producers and midstream operators looking to understand which are most likely to be exported.
I scream, you scream, we all scream for crude streams
The Permian Basin – the jewel in the US Lower 48’s crown – is forecast to account for half of all US onshore oil production by 2023, or approximately 5 million b/d. We expect a strong appetite for its light crude in Europe and Asia, where it may receive a premium of ~$0.50/bbl relative to WTI Cushing blend and Eagle Ford crude.