Technical & Fundamental Oil Reports Specialists

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US crude oil exports yet to take off

Published Wednesday, June 1st, 2016

Despite the favourable legislative backdrop, US crude oil exports have struggled to gain traction. Opponents of the ban on US crude exports had been vocal in highlighting the positive outcomes of its repeal in the run up to last December’s landmark decision. Among the many mooted benefits was an increase in US crude oil production which along with competitive refining pressures would result in falling domestic gasoline prices. Proponents of the 40-year old ban were similarly outspoken. They focused on the risks posed to energy security while refiners fretted that the economic rents enjoyed as a result buying crude at a discounted price would disappear.

Though US gasoline prices have averaged 40 cts/gal less in the first five months of 2016 than in the same period last year, this has been a function of falling oil prices rather than the removal of restrictions on crude oil exports. Moreover, the anticipated output increase in previously landlocked US crude has ultimately failed to materialise as depressed oil prices prompted crude oil production to fall by 1 mbpd since last year’s peak. Meanwhile, the wariness displayed by domestic refiners towards to repeal of the ban has been justified following a considerable narrowing of their margins. This is evidenced by the RBOB/WTI crack spread easing 10% so far this year to $17.72/bbl from last year’s average.

The underwhelming start to the year for US crude oil exports is confirmed by monthly figures from the EIA. Foreign sales of US crude averaged a lowly 369,000 bpd in the first two months of this year which was down 20% from the same period in 2015. A subsequent pick up in March to 508,000 bpd was overshadowed by separate weekly EIA data pointing to a renewed slump in recent weeks. One of the key factors behind this downbeat performance has been the failure of US crude to find its way into new foreign markets. Canada still takes 75% of US crude loadings destined to foreign buyers and has struggled to make headway since the repeal of the crude export ban. The exports that have taken place to new destinations have been more symbolic and experimental than based on sounds economics.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.