Guess who is the new OPEC?

Oil traders got a bit of excitement after a report by Reuters that the United States is starting to approve limited crude oil exports. Yet later it became more clear that they were talking about re-exporting foreign oil but none the less this could be the beginning of the movement to start the long road to approving U.S. oil exports.

Reuters reported that, “The U.S. government has authorized limited crude oil exports to Europe, for the first time in years, raising new questions about how companies are testing the limits of a controversial, decades-old exports ban. The Department of Commerce has granted two licenses to export crude to the UK since last year and another two to Italy, according to data Reuters obtained through a Freedom of Information Act request. One application for German exports was filed in January and is awaiting a decision by the Bureau of Industry and Security (BIS), which is responsible for reviewing requests to export crude under a 1975 law that bans most shipments with a few exceptions, including sales to Canada and re-export of foreign oil. These are the first permits for shipments to the UK since at least 2000 and the first to any European country since 2008, according to data from the BIS. The bureau has approved 120 licenses since January 2013, nearly 90% of which were for sales to Canada, the data show.

It was not immediately clear under which provisions BIS granted the European export licenses. The current regulation allows foreign crude to be re-exported from the United States if it is not commingled with U.S. crude, an option that some Canadian producers are said to be using. In rare cases, the regulation permits the exchange of U.S. oil for foreign crude or refined products of higher value, which has become an attractive option with the growing surplus of light, sweet shale oil.

Whatever the case, the licenses could add to the growing debate in Washington on the benefits and pitfalls of lifting the ban, among the year's most urgent energy policy questions, as the relentless rise in shale oil production threatens to saturate domestic refiners as soon as this year. They may add to expectations that the Obama administration will allow companies to use provisions in the existing regulation to slowly increase exports, while stalling on a decision on whether to scrap the ban. “

West Texas Intermediate gained(NYMEX:CLH14) on Brent crude after the story in part because U.S. exports of oil should close the spread but also because the market was anticipating a drawdown in inventory in the Cushing Oklahoma delivery hub. They got what they were looking for as Cushing fell by 1.6 million barrels. Yet over all saw a slight 384.000 build API said as refinery crude runs fell by 273,000 barrels per day. That drop in runs caused a drop of 1.2 million barrels of gasoline supply and a drop in distillates that could have been worse.

Natural gas makes another run as weather forecasts take a turn for the cold and demand for nat gas is on a record pace. This winter has stunned gas bears as demand hits records and draws are much larger than many thought possible. The moves have been as well. Nat gas rose almost 10% before pulling back as traders fear what could be a 260 bcf drawdown in inventory tomorrow.

Read more in articles that I wrote and am featured in this month’s Futures Magazine Here is a link to the story which is live now:  http://www.futuresmag.com/2014/02/01/the-natural-gas-economy-is-a-long-term-play    and http://www.futuresmag.com/2014/02/01/the-new-world-of-energy .

 

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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