As European Union (EU) countries reduced imports of Russian crude oil after the Russia-Ukraine war, the U.S. crude oil exports to Europe increased due to the reflective effect. Analysts say that the Russia-Ukraine war further strengthened the U.S. position as an oil producer.
Citing data from energy market research firm Kapler, the Wall Street Journal (WSJ) said on the 26th (local time) that the number of shipments from the U.S. to the European continent increased 38% year-on-year in the year since Russia invaded Ukraine in February.
The reason for the increase in cargo transportation by sea is believed to be due to the increase in the volume of West Texas crude oil (WTI) bound for Germany, France, and Italy. In particular, in Spain, U.S. crude oil imports increased 88% year-on-year after the war. In line with increased demand, U.S. crude oil production also hit an all-time high. Crude oil drilled in the U.S. last year averaged 11.9 million barrels per day.
On the other hand, as of last month, crude oil shipped from the Persian Gulf in the Middle East to Europe averaged only 1.53 million barrels per day last month. WSJ explained, “In recent months, more U.S. crude oil has been shipped to the European continent than to the Middle East in Asia.”
The increase in the transportation cost of Brent oil due to the Russia-Ukraine war affected the increase in WTI imports in Europe. Before the war broke out, WTI was only 3-4 dollars cheaper than Brent oil when all the transportation costs were added up. However, the WSJ explained that the gap between the two crude oil imports widened to up to $10 when the transportation costs were combined as the war disrupted shipping.
Attention is focusing on whether U.S. oil companies, which have been reluctant to increase production, will accelerate WTI production. Until now, the U.S. has been reluctant to increase crude oil production even though it is an oil producing country because of its high unit price. Because shale oil in the United States is drilled by a hydraulic crushing method, it requires a lot of water and sand in the production process. As a result, if crude oil prices fall below $40 to $50 a barrel, profitability will not be right.