Europe has increasingly been leaning on new regions for its crude imports since the beginning of the Russian-Ukraine war. This includes Africa, Latin America and the US, with Europe’s dependency on the latter country in particular rising strongly recently. In fact, US exports to Europe settled at 1.9 Mbd in March, which marked a strong uptick to the levels observed over the previous twelve months and represents an increase of around 400 kbd m/m. Considering that monthly European seaborne imports typically average around 11 Mbd, this represents almost 20% of the continent’s needs.
It should be noted, however, that most flows coming from the US comprise light sweet barrels, which are predominantly produced across the country's shale patch. In fact, 92% of the total European seaborne imports from the US comprised light sweet barrels (Midland: API gravity of 42.7° and Sulfur content of 0.1%) in March, which has left Europe with one problem, namely, that the average API density of flows has continued to trend higher over the first three months of the year. Part of this is due to the phase out of imports of the Russian medium sour benchmark Urals (API gravity of 31°) last year, which made up around 1.5 Mbd of the total imports in pre-war times. Considering this, the average density of European crude imports has risen from between 34-35° in 2021 to over 35° so far this year, with the continent seeing a marginal increase to around 35.5° more recently as well. The latter figure remains well above previous years and represents a marginal increase vs the levels seen at the beginning of last year (see chart below).
Despite the recent uptick in imports from the US, there is a natural limitation to the amount of light sweet barrels European refiners can consume. This should keep a lid on US flows to the continent and keep European demand for medium heavy grades supported over the coming year. One region that may be able to supply Europe with additional heavier barrels is Latin America, which has several countries that predominantly produce these types of grades. This includes Guyana, Brazil and Mexico, with the two former countries being larger suppliers of medium crudes.
Whilst European imports from Brazil have remained robust over the last three months, averaging above 400 kbd over this period, with medium density crudes accounting for roughly 70% of this total, exports to the continent have been declining recently as several Brazilian refineries are finishing turnaround activities and ramping up crude throughput. This has seen regional availability of medium grades ease over the last weeks. Nevertheless, some of this downside has seemingly been offset by Guyana, with European imports from the country surpassing 300 kbd so far this month, representing almost double of what we saw the month prior and marking the highest level on our records. With Guyanese exports to Europe remaining elevated, we should see arrivals from Guyana remain high. This is particularly true when we consider that imports from Brazil will come increasingly under pressure over the coming months as domestic intake rises and crude production remains essentially flat (Kpler estimates).
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