Citi sees end to sweet crude imports to US Gulf after 2013

NEW YORK: Soaring oil production in the United States may lead the Gulf Coast to drop sweet crude imports by the second half of this year, marking the start of a fundamental shift in global oil supply routes, said a Citigroup report issued on Wednesday.

US oil production has grown to 6.9 million barrels a day (bpd) from a monthly average of 5 million bpd in 2008, according the Energy Information Administration's data, an amount similar to the total production of many oil nations such as Norway and Algeria.

Citigroup said the oil supply glut, slower growth in refining capacity and a falling demand for oil products will reduce sweet crude supplies from West Africa, the Mediterranean and the North Sea.

"By this coming summer, the US should no longer need to import light sweet crude into the US Gulf Coast, while refiners on the US East Coast should be able to replace some of their imports with substitutes produced in the US midcontinent," Citi said.

Canada too should experience a decreasing need to import light sweet crude from Africa and the North Sea within two years as US Gulf Coast producers of excess oil, unable to export it anywhere else, will send supplies to Eastern Canada.

The Export Administration Act of 1979 bans the sale of US crude abroad aside from Canada and Mexico - both oil producing nations experiencing oil booms.

Maria van der Hoeven, executive director of the International Energy Agency, warned last week that the export ban could stifle the US oil surge as the country's refining capacity will not rise in tandem.

But Citi says the United States could agree to export oil to South Korea, which has the same trading partner status as Canada.

In the longer term, Citi expects the US Gulf Coast to rely on sour Canadian crude supplies, reducing the demand for imports from the Middle East, Venezuela and Mexico.

While Canada supplies the United States with sour crude, its sweet crude from its vast oil sand fields could become a new benchmark if exported to China, Japan and Korea, against which Middle East crude exporters could price their Asia-bound oil, Citi said.