Are US Crude Oil Exports Game Changers for the Crude Oil Market?

US crude oil exports 

The EIA (U.S. Energy Information Administration) reported that US crude oil exports averaged 501,000 barrels per day (or bpd) in the first five months of 2016. This was 9% higher than the 2015 daily average.

US crude oil exports rose after the lifting of the US crude oil export ban. The United States exported more crude oil despite the narrow spread between US and Brent crude oil prices in 1H16. For more analysis, read WTI and Brent Oil Spread Makes US Crude Oil Exports Unviable.

Are US Crude Oil Exports Game Changers for the Crude Oil Market?

Export destinations 

US crude oil is exported mostly to Canada. The United States has exported crude oil to 16 countries so far in 2016. The EIA reported that US crude oil exports reached 662,000 bpd in May 2016. However, a further rise in US crude oil exports will depend on a rise in domestic US crude oil production and a wider spread between US and global crude oil prices.

Meanwhile, lower tanker costs could motivate US producers to export more crude oil. The EIA said, “The recent cost of booking a tanker for a spot shipment of crude oil has been the lowest since 2009” for the week ended August 5, 2016. This may have boosted crude oil exports despite the narrow spread between US and global crude oil prices.

The rise in US exports shows signs of improving market share for US crude oil producers in the global market. The lifting of the oil export ban has also allowed US-produced crude oil to be marketed outside the United States in the oversupplied oil market, helping US oil producers in the depressed oil market.

Impact  

Volatility in crude oil prices affects oil producers such as Sanchez Energy (SN) and Goodrich Petroleum (GDP). It also impacts funds such as the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the United States Brent Oil ETF (BNO), and the United States 12 Month Oil ETF (USL).

In the next part of this series, we’ll take a look at how US crude oil product exports impact the crude oil market.