Have US Oil Exports Bottomed?

Brent-WTI spread

On April 15, Brent crude oil June futures settled ~$7.78 higher than the WTI crude oil May futures. On April 8, the spread was at ~$6.7—the lowest level for the spread since August 21, 2018.

Have US Oil Exports Bottomed?

Sign up for Bagels & Stox, our witty take on the top market and investment news, straight to your inbox! Whether you’re a serious investor or just want to be informed, Bagels & Stox will be your favorite email.

In the past five trading sessions, Brent crude oil June futures have risen 0.1%—compared to a fall by 1.6 percentage points in WTI or US crude oil May futures. During this period, the United States Brent Oil ETF (BNO) rose 0.2%—compared to a fall by 1.2 percentage points in the United States Oil ETF (USO). BNO tracks Brent crude oil futures, while USO tracks US crude oil futures.

US crude oil exports bottomed?

The above chart shows the generally 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. From December 2015 to the week ending on April 5, US crude oil production rose ~32.9% to 12.2 MMbpd (million barrels per day).

In the same week, US crude oil exports fell by ~0.37 MMbpd to ~2.35 MMbpd—an 11-week low. However, US crude oil exports rose by ~1.14 MMbpd year-over-year. The ongoing conflict in Libya has widened the Brent-WTI spread. The rise in the spread might push US crude oil exports higher in the coming weeks.

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 significant exposure outside the US.