The U.S. has become a major player in the global oil market, thanks to the shale revolution that has unlocked huge amounts of oil from the tight and low-permeability formations, using horizontal drilling and hydraulic fracturing technologies. The shale revolution has enabled the U.S. to become the world’s largest producer and exporter of oil, and to achieve energy independence and security. The shale revolution has also created economic and environmental benefits, such as lower oil prices, higher revenues, more jobs, and lower emissions. But the shale revolution has also brought new challenges and opportunities for the U.S. oil industry, as it has to cope with the fluctuations and the shocks of the global oil demand and supply, such as the COVID-19 pandemic, the OPEC+ production cuts, and the geopolitical tensions. The shale revolution has also affected the dynamics and the relationships of the various oil benchmarks, such as West Texas Intermediate (WTI), Brent, Western Canadian Select (WCS), and Magellan East Houston (MEH). These benchmarks are the reference prices for the different grades and locations of oil in the U.S. and the international markets, and they reflect the quality, the transportation cost, and the market conditions of the oil. The benchmarks are also used to price the oil contracts and transactions, and to hedge the oil price risk. The benchmarks are connected and interact with each other, depending on the availability and the accessibility of the oil supply, the demand and the preferences of the oil buyers, and the arbitrage and the competition of the oil markets. One of the key insights that emerges from the analysis of the U.S. oil market is that the U.S. oil production and exports are interdependent and mutually reinforcing, and that this link will drive the future growth and value of the U.S. oil industry. The U.S. oil production and exports are interdependent and mutually reinforcing, because:

• The U.S. oil production depends on the U.S. oil exports, as the exports provide an outlet and a market for the surplus oil that is not consumed by the domestic refineries or end-users. The U.S. oil production is mainly light-sweet crude from the Permian and other shale plays, which has a high API gravity and a low sulfur content. This type of oil is not compatible with some U.S. refineries, especially in the Gulf Coast, which are designed to process heavy-sour crude from Canada, Mexico, and Saudi Arabia. This creates a mismatch between the U.S. oil production and consumption, and a need for the U.S. oil producers and shippers to export the surplus light-sweet crude to the global markets, where the demand for light-sweet crude is high, especially in Europe and Asia. The U.S. oil exports also provide a higher price and a higher netback for the U.S. oil producers and shippers, as the U.S. oil benchmarks, such as WTI, are usually lower than the international oil benchmarks, such as Brent, due to the transportation and storage costs and constraints of the U.S. oil.
• The U.S. oil exports depend on the U.S. oil production, as the production provides the supply and the quality for the exports. The U.S. oil exports are mainly light-sweet crude from the Permian and other shale plays, which has a high API gravity and a low sulfur content. This type of oil is suitable for various refineries and end-users in the global markets, especially in Europe and Asia, where the demand for light-sweet crude is high. The U.S. oil exports also provide a competitive advantage and a market share for the U.S. oil producers and shippers, as the U.S. oil benchmarks, such as WTI, are usually lower than the international oil benchmarks, such as Brent, due to the abundant and diverse supply and quality of the U.S. oil.

The interdependence and the mutual reinforcement of the U.S. oil production and exports mean that the U.S. oil industry will continue to grow and prosper in the future, as the global oil demand and supply recover and stabilize after the COVID-19 pandemic, the OPEC+ production cuts, and the geopolitical tensions. The U.S. oil industry will also continue to affect and influence the global oil market, as the U.S. oil benchmarks, such as WTI, Brent, WCS, and MEH, will reflect and respond to the changes and the trends of the U.S. oil production and exports, and the availability and the accessibility of the U.S. oil supply, the demand and the preferences of the U.S. oil buyers, and the arbitrage and the competition of the U.S. oil markets. “Proud Mary, Encore Edition” is a report that provides a comprehensive and detailed analysis of the U.S. oil production and exports and how they are interdependent and mutually reinforcing. The report covers the history, the current status, and the future outlook of the U.S. oil production and exports, and how they affect the markets, the infrastructure, and the benchmarks of the oil and its byproducts. The report also provides data, charts, and maps that illustrate the trends and the insights of the U.S. oil production and exports. The report is part of RBN Energy’s 2023 Drill Down report series, a suite of reports covering many of the key issues expected to impact the markets for crude oil, natural gas and natural gas liquids.