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Commodities

Oil’s Skid and Our Future Outlook

By Elliott H. Gue, on Nov. 12, 2014

The US shale oil and gas boom has shifted global crude-oil flows, increasing competition among OPEC members.

For example, the US was once the West African nation’s largest single customer, importing more than 1 million barrels of crude oil per day from Nigeria in 2010.

According to data from the US Energy Information Administration (EIA), America’s intake of Nigerian crude oil dropped to almost nil over the summer; an abundance of inexpensive, domestically produced crude oil displace volumes from Nigeria.

(Click graph to enlarge.)Nigeria Export US Import

This development has forced Nigerian producers to find new end-markets. With the EU economy in shambles and oil imports falling, barrels from West Africa and the North Sea increasingly make the long voyage to Asia, where they compete with exports from Saudi Arabia and other Middle Eastern producers.

In a global oil market where swings of 500,000 barrels per day to 1 million barrel per day in production and demand can exert an outsized effect on prices, North America’s reduced demand for imported crude oil has shaken up trade patterns in the Atlantic Basin.

OPEC members have responded to this paradigm shift by seeking to preserve market share, acting in their national interest and not as a united front.

Although growing production of light, sweet crude oil from the Bakken Shale, Eagle Ford Shale and other unconventional plays has displaced imports into the Gulf Coast, California’s lack of inbound pipeline capacity means that the state still relies heavily on shipments from the Middle East.

California imports about half its crude-oil supply, with Saudi Arabia last year accounting for 230,000 barrels per day, or 29.5 percent of these volumes.

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