While the U.S. oil boom has ramped up refinery output a new study by Moody’s suggests that flattening global demand for oil products and increasing international competition could cut into U.S. refinery profits.
The wave of successful onshore drilling projects have boosted U.S. hydrocarbon exports during the last four years.
The country now exports 10 times as much gasoline, diesel and distillate as it did in 2010.
However, global demand has not kept pace with the flood of light oil coming out of U.S. shale and onshore plays.
Moody’s found that U.S. refineries are facing stiffer competition for export dollars from international players as growth in the demand for crude products weakens.
Saudi Aramco and China’s Sinopec are boosting production at the 400,000 barrels per day Yanbu refinery in while a the similarly sized Jubail refinery, a joint venture between Saudi Aramco and France’s Total, has already hit full capacity.
Intentional projects like Yanbu and Jubail are well positioned to fill European and international demand, the report said.
These refineries will also put pressure on European plants as EU companies deal with higher priced feedstock and strict regulations.
Some U.S. refineries have begun expanding and upgrading facilities to handle domestically produced shale crude.
However, Moody’s said the required retrofits are often “prohibitively expensive” and U.S. refineries will continue to primarily rely on imported heavy crude.
The International Energy Agency (IEA) dropped its global demand growth forecast by 22 percent as consumption slows and production continues to climb.
The revised forecast is down by about a fifth since from previous projections.
According to a report issued by Italy’s Eni in October the United States has become the global leader in oil and gas production growth as well as the world’s largest consumer.
Production in the United States grew by 12.2 percent thanks in large part to tight oil wells.
Moody’s said it expects North American refiners to continue investing in transpiration infrastructure to move product faster.