The United States has become a major exporter of crude oil since President Trump took office, sending a record 7 billion barrels into the world market last week.
Like all of President Trump’s campaign promises, his plan to create “complete American energy independence” and ban Saudi Arabian oil from the U.S. market is being fulfilled ahead of schedule.
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During the election campaign Trump vowed to secure U.S. energy independence from “our foes and the oil cartels,” and predictably the Saudis, major donors to the Clinton campaign, were not happy with this plan.
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Saudi oil minister Khalid Al-Falih warned Trump that banning Saudi oil could “seriously damage” the U.S. economy. “At his heart President-elect Trump will see the benefits and I think the oil industry will also be advising him accordingly that blocking trade in any product is not healthy,” Saudi Energy Minister and Aramco chairman Khalid Al-Falih told the Financial Times.
But the Saudi energy minister’s threats of serious damage to the American economy could not be further from the truth. When it comes to oil production in recent years, the U.S. is right behind Saudi Arabia. Production of quality “light sweet oil” is booming and Trump is turning America into a major exporter.
There is simply no need for the U.S. to import oil and prop up a repressive regime that was exposed by WikiLeaks as providers of “financial and logistical support” for ISIS.
U.S. oil producers sent a record 7 million barrels of crude out into the world market last week, at a time when OPEC members have cut back on their own output by nearly the same amount.
Analysts say it makes sense that U.S. crude slipped into the market void created by OPEC. It may also be a glimpse into the future where the U.S. and its shale production becomes a more significant player in the world export market. The 1 million barrels a day is nearly double the week-earlier level.
“We’re raising our output and it has more than a parochial impact. It’s not so much that it makes the U.S. inventories unwieldy. It’s that it adds to the global inventory,” said Tom Kloza, head of global energy research at Oil Price Information Service. “That really is the concern in the global oil market. We tend to import the medium and heavy [grades of crude]. I’m sure most of the exports are light sweet oil.”
Energy analysts were surprised by the amount of exports, which have been running about 500,000 barrels a day, and averaged 685,000 barrels a day over four weeks. But they were not ready to say this is now a new sustainable level for U.S. exports.
“This is the future. It’s not what it was in the shale boom, where there was just too much production, and we had these big discounts for crude in the United States,” Kloza said.
OPEC and other producers held back about 890,000 barrels a day from the world market in January, under their agreement to curb output in order to support prices.
Kilduff said China may have been a bigger destination for U.S. barrels because of its purchases of U.S. shale operations, and the output cuts by other producers have possibly made an opening. He also pointed to a report on Reuters that quoted sources saying as much as 7 million barrels were lined up and heading to Asia, with 2 million chartered to China in December by PetroChina and Unipec.
“We’ve been waiting for this to happen,” said Kilduff of the export jump. “We’ll see how it goes. We’re going to face competition.” He said cargoes also go to Europe and Latin America, and Canada has been a longtime export destination.
“It’s incredible that we were able to put 9.5 million barrels into storage last week, while exporting a million barrels a day,” Kilduff said.
The U.S. even with exports continues to import oil a lot of crude. It imported 7.5 million barrels of oil last week, down from 8.8 million barrels the week earlier.
U.S. oil production has been rising, and held steady at just under 9 million barrels a day last week.