U.S Crude Oil Exports on the Rise

In the wake of the 1973 OPEC oil embargo, the Congress wanted to keep domestic crude for American consumers only, and enacted a ban on the export of crude oil. The 40-year ban on crude oil was imposed to protect the domestic commodity market. Since the mid-2000s, U.S. crude oil production has rapidly increased as a consequence of technological improvements in drilling and production of oil.

This rapid increase in U.S. crude oil production, combined with decreasing consumption of oil, has had a profound impact on crude oil and refined product markets in the U.S. Crude oil imports have declined significantly over the same period. Since the new oil produced in the U.S. could not be exported, it had to be processed in U.S. oil refineries. Once domestic consumption was satisfied, refiners turned to export markets.

On December 18th 2015, Congress agreed to lift the ban on exports of crude oil, which is backed by the oil industry. Since the U.S. lifted a 40-year ban on oil exports, there’s been an increase in America’s crude oil exports to destinations other than Canada, which was excluded from the ban. The new legislation has no direct effect on the potential supply of U.S. crude oil exports to Canada. The existing rules allow U.S. oil exports to Canada, and supplies from regions such as the Bakken shale in North Dakota have been shipped by rail to refineries in Eastern Canada. As well, refineries in New Brunswick and Quebec have been importing crude by ship from the U.S. Gulf Coast.

Europe and Asia are flooded with oil from Russia and the Middle East, though the first two shipments to leave the U.S. post-export ban went to Europe. Exxon Mobil Corporation (NYSE:XOM) is the first U.S. oil major to export U.S. crude oil outside the U.S. The company’s Maran Sagitta oil tanker, which sailed from Texas In February, has reached the port of Augusta, Sicily, according to Bloomberg. Israel, China and other countries have also placed orders for energy supplies from U.S. oil producers.

U.S. crude oil exports rose to 591,000 barrels per day in April, up 83,000 barrels from March, according to new data from the U.S. Census Bureau. The U.S. exported 15.7 million barrels of crude oil in March, with only 7.7 million of those barrels going to Canada. Japan and Italy were the biggest buyers, importing more than 1 million barrels of U.S. crude oil. The figures come almost six months after the U.S. government lifted restrictions on crude exports.

Exports to Canada were 324,000 bpd, while exports to Curacao reached 90,000 bpd. Exports to Bahamas were 36,000 bpd. In total, exports were the highest on record since at least 1920, according to U.S. government data. In total, U.S. crude oil exports were the highest on record since at least 1920, according to U.S. government data. The record level of crude oil exports come some half a year after a decades-long ban on U.S. exports was lifted. Since then, a number of merchants traders, producers and even refiners have moved crude to Latin America, Europe and Asia, among other locations. One reason behind the rise in crude oil exports is cheap pipeline and railway fees to move crude from the fields in Texas, Oklahoma and North Dakota into the ports of the U.S. Gulf of Mexico.

According to the EIA, Benchmark North Sea Brent crude oil spot prices averaged $47/barrel in May, a $5/b increase from April and the fourth consecutive monthly increase since reaching a 12-year low of $31/b in January. Growing global oil supply disruptions, rising oil demand, and falling U.S. crude oil production contributed to the price increase. Brent crude oil prices are forecast to average $43/b in 2016 and $52/b in 2017. West Texas Intermediate (WTI)) crude oil prices are forecast to be slightly lower than Brent in 2016 and to be the same as Brent in 2017.

Oil traders are expecting more vessels to depart over coming weeks, with oil companies seeking to open new export routes from the U.S. West Coast.