US Crude Oil Exports Flow Again

Prices rose with little restraint until US crude production took off in 2008 with the advent of fracking, leading to a domestic glut, driving prices at the pump below $2 at many gas stations today, for the first time in recent memory.

But the battle with OPEC has sharply cut prices across the board, greatly narrowing the gap between what foreign refineries now pay for Brent oil – the global benchmark – and what domestic ones pay for USA benchmark West Texas Intermediate. Those actions brought an end to the 40 year old law that had banned exporting of US crude oil, a ban that was in effect since the Arab Oil Embargo in 1974.

Brent futures trade on London’s ICE exchange, while WTI futures trade on the New York Mercantile Exchange.

The main global contracts for the commodity surged more than 3.5 percent on Wednesday after the US Department of Energy reported inventories unexpectedly fell in the week ending December 18 while imports sank about 13 percent week on week. The American Petroleum Institute, an industry group, late Tuesday said inventories had dropped 3.6 million barrels, while analysts surveyed by The Wall Street Journal had forecast a rise of 600,000 barrels. “Having the oil export ban lifted permanently, it’s like having 100 Keystone pipelines“, The Hill quoted Ryan as saying. “At this price level, the number of rigs should continue to fall”.

“OPEC will likely move now to retaliate against US crude exports”, Fine said.

Oil jumped to a one-week high on Thursday after reports showed that USA crude inventories fell.

The addition of the light crude oil produced by the United States to global markets will increase the mix of oil available to various refineries around the world. That, in turn, raises the revenues of crude oil producers as they sell their products at higher prices than before. The Alaskan became chairman of the Senate Energy Committee after Republicans won control of the chamber in the November 2014 mid-term elections, ensuring the topic of exports got a regular airing at hearings. Brune said that Democrats won a few consolation prices in the budget Obama signed: a 5-year renewal of tax credits for solar and wind-energy projects, and money for a water and land conservation fund. He recruited a fellow Texan from across the aisle, Democratic Rep. Henry Cuellar, to help round up votes and diffuse a potential intrastate split between lawmakers representing oil producers and those more closely aligned with refiners.