Can U.S. crude produce calm?

While the world is in geopolitical turmoil somehow financial markets are subdued.

While many credit the Fed and their easy money policies another main component of this calm in the face of multiple storms is the rise of the U.S. crude oil (NYMEX:CLQ14) producer. Soaring U.S. crude oil production has allied fears that these many geo-political hotspots could cause oil price shock that could drive the world into a deeper recession.

Somewhat quietly as the market worried about wars in the Gaza Strip and Ukraine the U.S. energy industry was making history. Soaring US oil production has eased fears that that these many geo-political hotspots could cause oil price shock that could drive the world into a deeper recession. While many focused on breaking news events, the United States sent its first "approved" tanker of U.S. condensate oil since the 1970's. This high quality high yielding oil that comes from fraccing is becoming a very important strategic element in the global economy. Not only is the first oil exports lowering the globes economic fear index, it is our record exports of products and the yield that we are getting from this godsend.

Just yesterday the Energy Information Administration reported that refineries have been processing record volumes of oil recently. Refinery inputs hit a record-high 16.8 million barrels per day (bbl/d) in each of the past two weeks, exceeding the previous record from summer 2005. Refineries in the Midwest and Gulf Coast in particular pushed the total U.S. input volume upward, as these refiners' access to lower-cost crude oil, expansions of refining capacity, and increases in both domestic demand and exports contributed to higher refinery runs."

Because of the quality of crude many refiners are producing more product than there stated capacity. The U.S. refining industry is retooling to better handle its shift to this lighter than light crude oil. Refiners will attempt to increase margins by changing and expanding processing for the abundance of this oil. Condensate splitters are used with this oil are being added to existing refineries. Many will shift away from gasoline (NYMEX:RBQ14) to focus on distillate to cut into what might turn into a gasoline glut.

Not only will refineries expand we will probably see many new refineries being built. One company Calumet and MDU Resources will build the first new refinery since the 1970's Dickinson, N.D. with  a small 20,000 b/d capacity.

With U.S. crude oil production, rising steadily since 2008, is likely next year to hit its highest level since 1972 the world economy can breathe a little easier.

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.

 

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