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March
2017
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HYDROCARBON
ENGINEERING
I
n late 2014, Saudi Arabia ramped up its crude production
in order to regain market share, which had been eroded
by production increases in other OPEC countries and in
the US. High oil prices had helped give birth to the US
shale boom, which had cut into US crude import
requirements. US refineries with access to the new light tight
oils (LTOs) from shale plays enjoyed low cost feedstock, and
their utilisation rates rose. Global oil oversupply, accelerated
by the oil price war, created a low price environment in 2015
and most of 2016. At last, US production began to falter and
decline. Yet as 2017 begins, the global oil market is moving
into a closer balance between supply and demand, and
prices are moving up again. The decline in US production has
reversed, at least for the time being.
How is the US downstream sector faring? Low crude and
feedstock costs are usually a boon for the downstream sector,
and the recent up-down cycle in prices had had a visible
impact. In this article, the changes in US crude supply and
demand, refinery inputs, and how refineries receive their
crude are examined. All of these have changed enormously
since the shale boom began and during the oil price war.
Recent price cycles and US crude supply
Figure 1 displays the trend in spot prices for WTI and Brent
crudes, with the Brent-WTI price differential. The huge surge
in prices leading up to 2008 is considered one of the factors
that toppled the US economy into severe recession. It also
stimulated the shale boom, however, revitalising the US
upstream sector, which had a knock-on effect benefitting
the downstream sector also. As Figure 2 illustrates, US crude
production rose from 5.089 million bpd in 2006 to a peak of
9.43 million bpd in 2015. To place this in context, this gain in
Monument Valley, Arizona, USA.