Ban on the Run!
The Obama Administration is seriously considering lifting the ban on U.S. oil exports, a ban that came in response to the 1973 Arab oil embargo. Yet in this news era of high quality shale oil and the fact that U.S. refiners are not really set up to take full advantage of this pure oil it makes sense that this move is in the offing. U.S. Energy Secretary Ernest Moniz set the WTI on fire against the Brent after he said that the U.S. is considering relaxing regulations that ban the export of crude oil, citing growing domestic production of oil that isn't suitable for refining locally.
The reason is that this shale oil is of such high quality it almost does not have to be refined. In Canada the government introduced measures to strengthen oil tanker safety and address concerns about potential spills following increased transportation of oil and other hazardous materials in Canadian waters especially this volatile crude. Refiners in the United States are mixing shale oil with other heavier crudes just to be able to run it through the refineries. This is creating a glut because we just can’t refine the oil as efficiently as we can.
Of course some believe that U.S. exports will lead to higher prices but really the opposite eventually will be true! With the United States soon being able to produce Saudi Arabia like numbers of 9 or 10 million barrels of oil(NYMEX:CLM14) a day in the next few years, eventually the cost of oil would come down. U.S. exports may only reach say 5% or 6% of that total production meaning that we will retain most of that oil for domestic use.
Besides if we get a glut of this crude production may slow holding back the larger potential of the U.S. and global economy. A freely flowing oil market would reduce bottlenecks and bode well for jobs and the economy! The United States is already on track to re-export record amounts of gasoline and diesel and that is something that I do not think will change even if we export oil. On top of that the United States is already getting set to re-export massive amounts of Canadian crude to get around the U.S. oil export ban! Why not U.S. crude? The case against exporting U.S. crude is getting harder to make.
Today we get the EIA and the API preview showed what I expected. Gasoline inventories dipped 2 million barrels as strong demand and gas going on the rack led to a draw. There is not a lot of incentive to store gasoline right now. Crude inventories rose by 912,000 barrels in the week to 390.7 million and Cushing, Oklahoma, delivery hub fell by 590,000. Refinery crude runs fell by 236,000 barrels per day, API data showed. Distillate fuels rose by 883,000 barrels.
Hopes spring eternal. Cool temps are giving Nat gas bears hope and crushing the market that storage will be refilled. A big washout! But we should be near bottom. Spring seasonal in overdrive but if we fall too much lower it will take its toll on production. Demand though will rise. Dow Jones reports that Duke Energy unveiled plans to remake its power-generating facilities in Florida, including the construction of a natural gas-powered facility near its Crystal River facility.
Platinum(NYMEX:PLM14) is testing the April 14th high and could move higher if they take out those level. The big strike in South Africa continues to shut down 40% of global production.