Unforeseen US oil boom upends markets

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NEW YORK: The US oil boom has put European refineries out of business and undercut West African crude suppliers. Now domestic drillers threaten to roil Asian markets and challenge producers in the Middle East and South America.

Fifteen European refineries have closed in the past five years, with a 16th due to shut this year, the International Energy Agency said, as the United States went from depending on fuel from Europe to being a major exporter to the region.

Nigeria, which used to send the equivalent of a dozen supertankers of crude a month to the US, now ships fewer than three, according to the US Energy Information Administration. And cheap oil from the Rocky Mountains, where output has grown 31 per cent since 2011, will soon allow West Coast companies to cut back on imports of pricier grades from Saudi Arabia and Venezuela that they process for customers in Asia, the world’s fastest-growing market.

“I don’t really think anyone saw this coming,” said Steve Sawyer, an analyst with FACTS Global Energy in London. “The US shale boom happened much faster than people thought. We’re in the middle of a new game. There’s nothing in the past that predicts what the future will be.”

Advances in extracting oil from shale rock drove a 39pc jump in US production since 2011, the steepest rise in history, and will boost output to a 28-year high this year, according to the EIA. While drilling in shale is more expensive than other methods and poses environmental challenges, the prospect of a growing supply is encouraging analysts to predict a more energy-independent nation.

With US exports of gasoline and other refined products hitting a record last month and the country on pace to become the world’s largest oil producer by 2015, five years faster than the IEA’s earlier predictions, industry advocates such as Sen. Lisa Murkowski of Alaska are calling for an end to 39- year-old restrictions on US crude exports.

By arrangement with the Washington Post/Bloomberg News Service

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