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How US shale exports changed global oil markets forever

Read Time: 2 mins

The past five years could very well go down as the best years that US shale oil will ever see. Exactly how much oil leaves US shores in the coming years will largely depend on how quickly the world can recover from the pandemic and how aggressively politicians work to shift the world away from fossil fuels.

Perhaps no two groups have gained from the export of America’s shale boom more than producers of US oil and the giant commodities merchants who trade it. But the global reach of US shale has changed oil markets for good and remains a potent, diplomatic weapon for the US.

“Opening the shale revolution to the world through the export ban lifting helped shift the global oil market psychology from supply scarcity to abundance,” said Karim Fawaz, director of research and analysis for energy at IHS Markit. “It unshackled the US industry to keep growing past its domestic refining limitations.”

Trading giants including Trafigura Group, Vitol, Gunvor Group and Mercuria Energy Group profited from buying cheaper shale oil, shuttling it to the US coast and shipping it to eager buyers in Europe and Asia.

Betting that shipments would surge, they expanded their trading desks in the US, invested in ports, pipelines and export facilities. By the last week of 2019, exports of American oil had reached nearly 4.5 million barrels a day.

But exports have turned US shale into a permanent thorn in OPEC’s side. The oil cartel has had to join forces with Russia, Mexico and other major producers to ratchet back production several times in the past five years while US shale expanded its reach into key markets.

Shale now shares the fortunes — and the misfortunes — of being a major exporter. With American shale now readily available in global markets, oil price spikes tied to conflicts in the Middle East are now shorter and more subdued.

“The flow of US oil since the ban’s end has kept global oil supply in balance even at times when politics have caused the loss of supply from Iran, Venezuela and Libya,” said Sandy Fielden, director of oil research at Morningstar Inc. For more information visit