For the past three-plus years, Corpus Christi has dominated the U.S. crude oil export market, largely due to the availability of direct pipeline access from the Permian to two Corpus-area terminals in Ingleside: Enbridge Ingleside Energy Center (EIEC) and South Texas Gateway (STG) – which can partially load the huge 2 MMbbl Very Large Crude Carriers (VLCCs). But pipeline capacity to Corpus is now nearly exhausted, and with rising Permian production and strong exports, an increasing share of West Texas crude output is sent to Houston by pipeline with capacity to spare. The catch for Permian shippers with Permian pipeline capacity in Houston is that the Midland to MEH (Magellan East Houston) price differential for WTI has been depressingly low – averaging $0.22/bbl this year, compared to almost $20/bbl. for a few months in 2018 and averaging $5.50/bbl as recently as 2019. However, the price differential between Midland and MEH WTI appears to be on the verge of some sort of rally, as we discuss in today’s RBN blog.
A few months ago, a Calling the shots, we said that exports are, well, calling the shots in the US crude market. Lower 48 oil production now averages about 12.5 Mb/d, Alaska adds another 400 Mb/d, the highest level in three and a half years and just a tiny 1.5% of where production peaked before COVID. And exports outside the Gulf Coast? They’ve averaged about 3.7 Mb/d so far this year, according to RBN Weekly Crude Voyager report, a gain of about 500 Mb/d compared to 2022 (which was not much). With WTI prices now flirting with $90/bbl and OPEC+ keeping a lid on their output, continued growth in both US production (the vast majority in the Permian) and export volumes are definitely in the cards
It also seems likely that Corpus’ share of export volumes has been overtaken, at least for now. Don’t get us wrong, Corpus is still the big dog. Handled 60% of Gulf Coast export volumes last year (see Sooner or later) and has accounted for roughly the same share of exports so far in 2023. Shippers love the benefits that come from piping clean barrels from Midland WTI to EIEC and STG to Ingleside, where crude can be loaded directly onto VLCCs which can be filled to capacity with just a reverse lighter from a shore tanker. It’s hard to beat this situation or the economy in Houston or even the Inner Harbor Corpus terminals, and Ingleside’s magnetic pull on Permian barrels has left many of the pipelines from West Texas to Houston well below capacity.
