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How the Lifting of US Oil Export Ban Impacts the Tanker Industry

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US oil production

US oil production has reached levels not seen in decades. Oil production was recorded at 9.2 million barrels a day on December 18, 2015. For the past four decades, the United States had a ban on exporting crude oil (DBO). The ban was recently lifted, and now the US is free to export oil to other countries.

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US oil exports

Though the US had a ban on crude oil exports, it still could export to a few countries like Canada. US oil exports were recorded at 500,000 barrels a day on December 18, 2015. This figure is now expected to increase substantially in the long term.

Short-term issues

There is already an oversupply of crude oil. Brent crude is normally more expensive, but currently, the spread between WTI and Brent crude prices has narrowed. This makes the US‘s light crude oil uncompetitive in the export market. Also, there are a few infrastructure issues. Most US ports are well equipped to import oil but not to export oil. With these issues, US exports may not spike immediately in the short term.

Smaller tankers will benefit more

Most US ports are not equipped to export oil, but some ports in the Gulf area can support only smaller vessels like Aframax while a few others also support Suezmax. It is likely that only smaller tankers will benefit from the lifting of the ban in the short term. Teekay Tankers (TNK) and Tsakos Energy Navigation (TNP) operate Aframax. Nordic American Tanker (NAT) operates only Suezmax vessels while Euronav (EURN) and DHT Holdings (DHT) mostly have VLCCs (very large crude carriers) in their fleet. The benefits from the lifting of the ban for all tanker segments will mostly be in the longer term.

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