A "very well-supplied" oil market prevented prices from spiking to $140/b last week when two oil product tankers were attacked near the Strait of Hormuz, US Deputy Energy Secretary Dan Brouillette said Saturday in an interview with S&P Global Platts.
The ship attacks and concerns about oil supply security have dominated talks among delegates at the G20 energy and environment meetings in Japan.
Saudi Arabia's energy minister Khalid al-Falih said Saturday that the attacks have damaged global confidence in oil security, and he called for a "rapid and decisive response" to the threat to energy supplies.
International Energy Agency chief Fatih Birol said Friday that the group was very concerned about the attacks. He said IEA was ready to respond in the event of a supply disruption with a range of options, from providing members immediate policy advice to coordinating a release of emergency oil stockpiles.
Brouillette's agency manages the US Strategic Petroleum Reserve, which currently holds 644 million barrels of crude oil. Asked if the Trump administration would tap the SPR in response to a blockage of the Strait of Hormuz, he said: "The SPR is intended for large disruptions in the marketplace."
"I can't tell you without knowing the details whether this particular event constitutes an emergency under the federal law," Brouillette added. "But it's these types of events we look at with regard to release of the SPR."
RISING US EXPORTS
Brouillette's message to G20 delegates focused on rising US oil and LNG exports and US producers' willingness to meet the energy needs of Asian and other customers.
Some analysts have questioned whether the world can absorb all the light sweet crude the US is projected to export in several years, given complex refiners' reliance on heavy crudes. US sanctions against Iran and Venezuela have removed mostly heavy crude from the market.
Brouillette dismissed the crude quality concerns. He said Gulf Coast refiners have started adjusting operations to make use of more light crude, while there has been an uptick in alternative heavy crude sources, such as offshore Gulf of Mexico production.
On LNG exports, Brouillette said China's retaliatory tariffs and trade policy uncertainty have not damaged the prospects for the US LNG industry. He said sales to South Korea, Japan and Mexico make LNG exports to China "almost a rounding error."
"The trade conversation with China at the moment has very little impact on US LNG production or exports," he said.
LNG COMPETITION
Brouillette added that the US is not worried about competition from LNG export terminals in British Columbia, Canada, which hold a location advantage to Gulf Coast ports as cargoes can reach Asia quicker.
"We hope they enter the market because it means cheaper gas for everybody," he said. "It only makes us better competitors and more efficient operations if they enter the market. We face fierce competition from Australia, Qatar and others already."
On reports that Russia is boosting gas shipments to Europe to test the limits of US LNG exports, Brouillette said Europe's access to US LNG imports has forced Gazprom to cut its prices.
"That's good for consumers in Europe," he said. "More and more countries are starting to realize the argument around diversity of supply and diversity of suppliers in particular."
US energy secretary Rick Perry met last week with Polish President Andrzej Duda at Cheniere's Sabine Pass LNG terminal near the Texas-Louisiana border.
