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Will US Oil Exports Continue to Rise?

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Brent-WTI spread

On March 25, Brent crude oil May futures settled ~$8.4 higher than the WTI crude oil May futures. On March 18, the spread was ~$8.2. In the past five trading sessions, the Brent crude oil May futures fell 0.5%—40 basis points less than the fall in WTI or US crude oil May futures. During this period, the United States Brent Oil ETF (BNO) fell 0.5%—the same as the fall in the United States Oil ETF (USO). BNO tracks Brent crude oil futures, while USO follows US crude oil futures.

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US crude oil exports

The above chart shows the broadly positive relationship between US crude oil exports and the Brent-WTI spread since December 2015. Exports seem to follow the Brent-WTI spread with a lag. When the US lifted the ban on US crude oil exports in December 2015, US crude oil production started rising. Since December 2015, US crude oil production has risen ~31.8% to 12.1 MMbpd (million barrels per day) in the week ending on March 15.

In the same week, US crude oil exports rose by ~0.8 MMbpd to ~3.34 MMbpd—the second-highest level. US crude oil exports have risen by ~1.8 MMbpd year-over-year. The EIA’s US Crude Oil Weekly Production data on March 27 and Monthly Crude Oil Production data on March 29 will be important for the Brent-WTI spread. Any rise in the production figure will widen the Brent-WTI spread and might increase the US oil supply to foreign countries.

Brent-WTI spread and US upstream companies

The widening gap between Brent and WTI crude oil prices could benefit US crude oil exporters. Any rise in the spread could help mitigate transportation costs and increase profits.

However, a rise in the Brent-WTI spread could mean lower domestic prices for US crude oil producers like Chesapeake Energy (CHK) and Concho Resources (CXO) compared to their peers including ConocoPhillips (COP), which has a significant exposure outside the US.

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