Oil Exports Trim US Trade Deficit as Fuel Gap Shrinks: Economy – Bloomberg

Record petroleum exports helped
shrink the U.S. trade deficit in December to the smallest in
almost three years as America moved closer to energy self-
sufficiency, a goal the nation has been pursuing since the 1973
Arab oil embargo.

The gap narrowed 20.7 percent to $38.5 billion, the
smallest since January 2010 and lower than any estimate in a
Bloomberg survey of 73 economists, Commerce Department figures
showed today in Washington. Oil exports climbed $11.6 billion.
Another report showed wholesale inventories unexpectedly
declined in December.

In addition to trimming the trade deficit, greater fuel
autonomy helps boost household incomes, jobs and government
revenue and makes American companies more competitive. An
improving global economy, reflected by record exports to South
and Central America, also means manufacturers such as
Caterpillar Inc. will benefit.

“The trend toward energy independence is there, and it is
picking up,” said Andy Lipow, president of Lipow Oil Associates
LLC in Houston with more than 30 years of experience in refining
and trading. “This bodes well for our economy. As our oil
production increases, our reliance on other parts of the world
for oil comes down.”

Stocks climbed after the report and on corporate earnings
that topped estimates. The Standard & Poor’s 500 Index rose 0.5
percent to 1,516.3 at 12:52 p.m. in New York. Shares of oil and
gas companies such as Hess Corp. and Valero Energy Corp. also
advanced.

Wholesale Inventories

Another Commerce Department report showed stockpiles at the
nation’s wholesalers dropped 0.1 percent in December, the first
decrease in six months. The decline followed a revised 0.4
percent gain that was less than initially reported.

The drop in stockpiles at distributors means inventories
will probably subtract even more from fourth-quarter economic
growth than currently estimated, partially offsetting the
benefit from the narrower trade deficit.

The reports prompted JPMorgan Chase & Co., Barclays Plc and
Morgan Stanley economists to revise their tracking estimates of
fourth-quarter gross domestic product to show a gain compared
with the 0.1 percent decline initially reported by the Commerce
Department.

After eliminating the influence of prices to produce the
numbers used to calculate GDP, the trade deficit narrowed to
$44.1 billion in December, the smallest in six months, from
$51.8 billion.

Petroleum Gap

The jump in fuel sales to overseas buyers, combined with
purchases of the fewest barrels of imported crude in almost 16
years, led to the smallest petroleum deficit since August 2009,
the trade data showed.

A surge in U.S. oil production has made the nation the
world’s largest fuel exporter. Petroleum-product exports to
Brazil grew by 59 percent in the first 11 months of 2012, to
255,000 barrels a day, according to data from the Energy
Information Administration. Venezuelan imports from the U.S.
rose 56 percent.

The U.S. met 84 percent of its own energy needs in the
first 10 months of 2012, on track to be the highest annual rate
since 1991, according to data from the EIA, the statistical arm
of the Energy Department. The country’s crude output grew by a
record 766,000 barrels a day last year to the highest level in
15 years, the biggest annual jump since the first commercial
well was drilled in Pennsylvania in 1859.

As the U.S. makes further strides in energy production, the
economy will benefit from a narrowing trade gap, job and income
growth and improvement in manufacturing and services.

More Jobs

“We’ve begun to see the repatriation of manufacturing jobs
back to the country in small amounts, and that trend is likely
to continue,” said Lipow, who worked for 16 years at Amoco Oil
Company and Amoco Corp., according to the consulting firm’s
website.

The median forecast in the Bloomberg survey of economists
called for the U.S. trade deficit to shrink to $46 billion.
Estimates ranged from gaps of $42.3 billion to $48 billion. The
Commerce Department revised the November shortfall to $48.6
billion from an initially reported $48.7 billion.

For all of 2012, exports climbed 4.4 percent to a record
$2.2 trillion. Imports advanced 2.7 percent to $2.74 trillion.
That pushed the trade gap last year down to $540.4 billion from
$559.9 billion in 2011.

“The improvement in exports is encouraging,” said Brian Jones, a senior U.S. economist at Societe Generale in New York,
who projected the December gap would drop to $43.3 billion, the
third-lowest in the Bloomberg survey. “With Europe looking less
weak and Asia getting better, the outlook for U.S. exports has
got to be pretty positive.”

December Exports

In December, exports increased 2.1 percent to $186.4
billion, the second-highest on record after September’s $187.1
billion. In addition to the pickup in energy exports, the gain
reflected a $1.2 billion jump in overseas shipments of gold.

Imports dropped 2.7 percent to $224.9 billion in December.
The U.S. imported 223 million barrels of crude oil, the fewest
since February 1997.

Combined with a lower price per barrel, the value of
petroleum purchases decreased to $21.2 billion in December, the
smallest since February 2011.

Consumer goods imports climbed to a record $45.2 billion,
reflecting a jump in purchases of clothing, furniture and
appliances that show demand was holding up as the year drew to a
close.

U.S. Dollar

American exporters may also benefit from a weaker U.S.
currency, which makes their goods more attractive to overseas
buyers. As of Feb. 1, the dollar had dropped 4 percent from last
year’s peak on June 1 against a trade-weighted basket of
currencies from its biggest trading partners, according to
Federal Reserve data.

Caterpillar, the world’s largest maker of construction and
mining equipment, may benefit from improving prospects in the
U.S. and abroad.

“The key phrase here when we talk about the world economy
in 2013 is a bit better but still weak,” Michael DeWalt, a
spokesman for the Peoria, Illinois-based manufacturer, said
during a Jan. 28 earnings teleconference. “In the United
States, we’re becoming increasingly optimistic,” and “in
China, we’re expecting improvement in 2013,” he said.

China, the world’s second-biggest economy, accelerated in
the final three months of 2012 for the first time in two years.
The growth momentum is “relatively strong,” its central bank
said this week, while warning that inflation risks may rise.

To contact the reporter on this story:
Shobhana Chandra in Washington at
schandra1@bloomberg.net

To contact the editor responsible for this story:
Christopher Wellisz at
cwellisz@bloomberg.net