With America's energy renaissance, set patterns of crude oil trade have been upended, and new paths have been established. The impact is far-reaching but not easily defined.

The substantial increase in U.S. light tight oil (LTO) production has remapped global trade flows, with crude increasingly streaming from West to East rather than East to West, and most industry observers expect this trend to continue.

Continuous change is the norm in the oil and natural gas industries. The energy mix changes. The balance of demand shifts.

In one of the latest displays of evolving crude-trade flows, the top 10 global crude importers are expected to see significant shifts over the next decade. Imports will remain heavily concentrated in the major refining centers in Asia, Northwest Europe (NWE) and the U.S., but the balance among these importers will begin to change, recent research from U.K.-based BMI Research showed.

As part of their outlook, BMI Research analysts say a third dynamic will occur: a structural shift in regional trade flows.

Based on the analysis of net crude imports into Africa, the Asia Pacific, Central and Eastern Europe (CEE), Latin America, the Middle East, North America and NWE regions, BMI identified three emerging trends in regional crude-trade patterns:

  • Increasing insularity of the Americas markets;
  • Declining role of NWE refiners; and
  • Entrenching core Middle East-Asia trade link

In its annual five-year oil-market outlook—published in February—the International Energy Agency (IEA) said global oil-trade routes are reshaping because the old rules of oil consumption no longer apply.

“The center of gravity of oil demand continues to move east,” the IEA said. “First and foremost, oil demand is no longer about the industrialized world: In 2014, for the first time, developing countries outside the OECD burned more oil than the rich countries inside it. In 2015, for the first time, Asia will consume more oil than the Americas.

The nature of oil consumption is also changing, according to the IEA.

“In the past, there was a straight line between cheaper oil and increased demand. Not anymore. As a result of the 2008 global financial crisis and increased energy-efficiency efforts, cheaper oil no longer automatically finds buyers.”

Americas markets

On a regional basis, North America will see the largest proportional swing in its net crude imports, because of a combination of rising Canadian exports and declining U.S. imports.

According to BMI Research, North American net crude imports will drop from 4.1 million barrels per day (MMbbl/d) in 2014, to 1.6 MMbbl/d by 2024—a decline of 61%.

“Given the appetite among U.S. refiners for heavier grade crudes, increasing heavy crude production in Canada and the expansion of cross-border U.S.-Canadian pipeline infrastructure, we also expect the U.S. to accept a higher volume of Canadian crude in the coming years,” the analysts stated. “This in turn suggests the evolution of a more insular North American crude oil market.

The dynamics will be somewhat mirrored in Latin America.

“For Latin America, we forecast a 665,000-bbl/d [barrels per day] decline in net crude exports, reaching 2.9 MMbbl/d by 2024. This will be due to the mix of relatively stagnant crude output and a significant up-scaling of the region’s refining capacity, which we estimate at around 800,000 bbl/d across the 10-year forecast period. As regional refiners soak up a greater share of output, we expect to see an incremental pullback of Latin American exporters from the global crude markets,” the report noted.

NWE refiners

Shrinking refining capacity in NWE will continue to dull demand for imported crudes, driving a 1-MMbbl/d (12.7%) decline in net imports over the next 10 years, according to BMI Research.

That will further pressure some of the region’s key suppliers—producers in Algeria and Nigeria in particular.

With surging LTO output in the U.S., “These countries, which produce a high proportion of light sweet crudes, have lost share in their traditional North American export market.”

“In response, they have increasingly reoriented exports toward Europe, but the inability of European refiners to fully absorb the displaced crude has seen a build-up of cargoes in the Atlantic Basin market and heavy downward pressure on prices,” the BMI analysts observed. “A further drawdown in NWE refining capacity may serve to exacerbate this trend, in a looser global oil market.”

Mideast-Asia trade

The route between the Middle East and Asia remains at the heart of global crude trade flows, given the volume of production and demand in the two regions respectively.

However, in pursuit of broader energy security, Asian buyers have increasingly looked to diversify their sources of supply, according to BMI.

“In our view, the opportunities for diversification away from the Middle East will be constrained over the next 10 years, due both to the sharp rise in Asia Pacific import demands and the lack of alternative suppliers.”

BMI Research sees Asia-Pacific net crude imports rising from 17.6 MMbbl/d in 2014 to 21.2 MMbbl/d by 2024—a 20.6% increase.

“In contrast, we forecast growth in only two net-exporting regions: the Middle East, 1.5 MMbbl/d or 7.4%; and CEE, 250,000 bbl/d or 4.4%,” the analysts noted. “Under pressure in the alternative Americas and European markets, key Middle Eastern producers are explicitly re-focusing output toward Asia. Cargoes backed from North America and Europe, coupled with incremental production gains, will serve to deepen crude flows from the Middle East to Asia over the next decade.”

Editor’s Note: Over the next decade, the world’s top net importers of crude oil are expected to incur significant changes. This is the final installment in a multi-part series examining how the U.S. oil boom continues to remap global oil-trade flows.

Kristie Sotolongo can be reached at ksotolongo@hartenergy.com.