Crude Tanker Indicators: Positive sentiment (Part 5 of 5)
Energy boom in the United States
U.S. has historically been the largest importer of oil. But since horizontal drilling and hydraulic fracturing technologies (which made it possible for energy companies to extract oil from areas where oil extraction was initially considered impossible and uneconomical) started to take off after successful trials, U.S. has begun its journey of becoming an energy-independent country. The EIA estimates that the country will become the largest producer of crude oil within the next few years, knocking countries such as Russia and Saudi Arabia off the top chart.
U.S. and Canada are expected to account for most of the world’s projected growth in production of oil and other liquid fuel through 2015 while China and less developed countries are expected to drive most of the growth in consumption, according to the EIA’s July forecast.
Oil imports data and outlook
As per the American Petroleum Institute, total U.S. imports of crude and fuel in June dropped to the lowest level for June since 1993 as domestic production surged. Total imports dropped 5.7% from a year earlier to 9.23 million barrels a day, below 10 million barrels for the 10 th consecutive month.
The growth in domestic production has contributed to a significant decline in petroleum imports. For 2015, the U.S. Department of Energy foresees oil imports to slump to its lowest level since 1970. The EIA adds that by the end of 2015 imported oil would account for only 22% of U.S. consumption, or about four million barrels a day as compared to an average of 33% in 2013 and 60% in 2005.
Domestic production on the rise
Due to the use of hydraulic fracturing or fracking in shale rock deposits, U.S. crude oil production has surged from 5 million barrels in 2008 to 7.4 million barrels a day in 2013. The EIA estimates production to peak to 9.3 million bpd in 2015. Notably, Saudi Arabia is currently producing 9.5 million barrels a day of crude.
With domestic production in U.S. on the rise, the country’s dependency on foreign oil reduced and thereby the global oil supply chain that is the crude tankers industry experienced lesser business. This trend may negatively affect the crude tanker stocks – Frontline Ltd. (FRO), Teekay Tankers Ltd. (TNK), Nordic American Tanker Ltd. (NAT), and Tsakos Energy Navigation Ltd. (TNP) as well as the Guggenheim Shipping ETF (SEA).
Browse this series on Market Realist:
- Part 1 - Why the Baltic Dirty Tanker Index is nearing a 5-month high
- Part 2 - China auto sales supporting oil demand
- Part 3 - China PMI soaring to 27-month high
- Commodity Markets