Must-know: Crude oil indicators showing high positivity

Part 2
Must-know: Crude oil indicators showing high positivity (Part 2 of 6)

Why allowing crude oil exports has impacted U.S. economic growth

U.S. to allow oil export

The U.S. Department of Commerce has decided to allow the first exports of U.S. crude oil since Congress imposed a ban on such sales, except to Canada since the 1970s. Ultra-light oil, often referred to as “condensate” by the energy industry, will be cleared to be exported abroad, according to a private ruling by the federal government. This move would help the U.S. economy resume oil sales abroad. It would allow the economy to reap the full benefits of the shale revolution that has propelled the U.S. back into the top ranks of global oil and gas production.

Oil ExportEnlarge Graph

U.S. oil exports

The Department of Energy total U.S. crude oil exports data reflected that for the third week ending June 20, exports touched its 52 week high of 273—1,000 barrels per day—a significant surge from 74 in the previous week.

It’s important to note how the beginning of the U.S. crude oil exports might affect the Guggenheim Shipping ETF (SEA) and crude tanker owners such as Tsakos Energy Navigation Ltd. (TNP), Teekay Tanker Ltd. (TNK), Nordic American Tanker Ltd. (NAT), and Frontline Ltd. (FRO).

Outlook

Although the market believes that the condensate export volumes are likely to be limited and minimal, any increase in export volumes should have a net positive impact on the crude oil tanker market. Given the limited condensate field production in the U.S. and limited scope of approvals, U.S. exports of condensate are likely to be limited over the next 18 months. Also, any heavy condensate volumes exported out of the U.S. would be carried out on either Aframax crude oil tankers or Panamax crude oil tankers.

As a result of the Department of Commerce ruling, shipment of condensates could begin as soon as August. Initially, the shipments are likely to be smaller with the U.S. forecasted to export 300,000 barrels of condensate per day by the end of the year.

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