U.S. energy scenario
Historically, the U.S. has been the largest oil importer. However, U.S. production is surging due to a combination of horizontal drilling and hydraulic fracturing, or fracking. The combination unlocks supplies from shale formations. Now, the U.S. is close to being a energy-independent country.
The Energy International Association (or EIA) expects the U.S. to become the largest crude oil producer within the next few years. It will race ahead of countries like Russia and Saudi Arabia.
Narrowing oil imports
The EIA data revealed that for the week ending October 3, 2014, U.S. crude oil imports averaged 7.7 million barrels per day (or bpd). This was an increase of 428,000 bpd from the previous week. For the last four-week average as of October 3, 2014, crude oil imports into the U.S. averaged 7.5 million bpd. This was 6% less than same period in 2013. This suggests the higher use of domestically produced oil compared to the imported oil.
Rising domestic production
For the week ending October 5, the U.S. recorded an average of 8.88 million bpd. This was the highest since March 1986. It was an increase of 285,000 bpd from the first week of September. The domestic production touched its 28-year high and refineries shut down units for maintenance. However, on October 7, 2014, the U.S. government commented that oil demand is expected to slip to its lowest level since 2012.
Looking ahead to 2015, the EIA forecasted that the U.S. will consume 18.92 million bpd of oil. This is down from 18.96 million in 2013. Also, the EIA estimates output to increase to 9.5 million bpd next year. This will be the highest since 1970.
In the last month, the agency also reduced its global demand projections for this year and next year. The International Monetary Fund cut its 2015 world economic growth forecast.
Crude tanker stocks—like Frontline Ltd. (FRO), Teekay Tankers Ltd. (TNK), Nordic American Tanker Ltd. (NAT), and Tsakos Energy Navigation Ltd. (TNP) and the Guggenheim Shipping ETF (SEA)—will likely be impacted with a drop in oil imports.