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Unimaginable even a few years ago, booming domestic supplies have major traders applying for...

Unimaginable even a few years ago, booming domestic supplies have major traders applying for licenses to export substantial amounts of oil from the U.S. for the first time in decades, reports the FT. Exports would not only affect worldwide trading patterns, but also put pressure on the price of Brent crude, which currently sits at a hefty premium to the U.S. benchmark.
Comments (43)
  • Wow, then you would think that the price of gasoline in the US would be lower. It is very near the high that got Bush canned, but still lower than Obama want's it (according to the transcripts from this 2008 campaign.) What I don't understand is why when Bush was in office the high price was a national disgrace and now it is not even mentioned.
    11 Oct 2012, 04:07 PM Reply Like
  • Bush didn't get canned, he served 2 terms and was limited out. The President is the only one with term limits in our government, which is the root of all our problems.
    11 Oct 2012, 05:10 PM Reply Like
  • Well effectively his party got canned.
    11 Oct 2012, 07:10 PM Reply Like
  • This is amazing.


    This obviously confirms lack of much demand in the US, which is likely indicative of declining consumption in tandem with increasing production. And of course should be bearish for crude price...


    The biggest issue in North America seems to be the inability to get cheaper WTI priced product to the East Coast which typically pays more for crude and refined products. It seems, if I remember correctly, because of things like the Jones Act and lack of pipelines and efficient transportation, the Eastern US tends to pay Brent prices instead of WTI.


    Now, instead of fixing the problem created by lack of infrastructure and outdated law, companies want to ship out excess product to other markets.


    The article makes an interesting point that the Jones Act effectively makes shipping oil up the East Coast cost $4.55/brl as opposed to foreign flagged ships costing $1.50/brl.


    It seems oil could/should be cheaper in the event of an adjustment to the Jones Act or pipeline buildout enabling access to WTI priced product to the East Coast.
    11 Oct 2012, 04:13 PM Reply Like
  • It's not bearish for crude if there is emerging market demand to pick up the slack
    11 Oct 2012, 10:51 PM Reply Like
  • And that's where so much of the demand is coming from.
    12 Oct 2012, 07:48 AM Reply Like
  • Emerging market demand growth has been decreasing.
    12 Oct 2012, 10:58 AM Reply Like
  • A short term blip perhaps.


    The long term trend however is clear:
    12 Oct 2012, 12:48 PM Reply Like
  • You're watching demand, not the rate of demand growth.


    And most observers apply a very one dimensional, linear, perspective to energy consumption. Productivity/energy consumption, and consumption/GDP are also important metrics to watch, outside of assuming that the world will need a very linear barrel number to accommodate a higher population or a wealthier one.


    There are a number of developments worldwide all contributing to steadily increasing the rate of deceleration in demand growth.
    12 Oct 2012, 12:55 PM Reply Like
  • "There are a number of developments worldwide all contributing to steadily increasing the rate of deceleration in demand growth."


    The good news is that our government is working to reduce wealth and since we have fewer jobs (and therefore don't have to drive) I guess we are leading the charge to the bottom (all the while China, Korea, and other parts of Asia get wealthy.) Boy it feels good doing the right thing.
    12 Oct 2012, 08:08 PM Reply Like
  • Oil prices crippling our economy yet we can manage to export it...
    11 Oct 2012, 04:15 PM Reply Like
  • Location location a pipeline to move it where it needs to be....nope...Obama and the greenies do not want anymore pipelines.....and another economic reality....price..if the price drops...there will be no more exploration nor exports...Econ 101 you want good jobs and cheaper gas..then allow drilling...all this new oil is coming from PRIVATE land....Obama does not allow drilling on public up the public lands..and build pipelines to get the oil to the refineries..and let them build new refineries...Libs what do you think...????
    11 Oct 2012, 04:34 PM Reply Like
  • The pipeline you speak of would carry a type of oil produced in Canada that contains highly corrosive chemicals (Unlike the oil in North Dakota). The chemicals will make the pipeline obsolete in ten years, if it doesn't spring a leak and create a dead zone first. Let's make sure we have the adequate technology before we build it. Even the British Columbians are hesitant about such a pipeline going through their forests. This is the problem when a project gets politicized, either it won't be done right or it won't be done at all. We can build it right.
    11 Oct 2012, 06:15 PM Reply Like
  • We have an excess of oil and gasoline....Cushing is full.....the oil is stranded here....mostly in Cushing.....Brent more reflects middle east tension....we are exporting gasoline into a Brent priced market via tankers....which means we pay Brent like prices for gasoline here....more oil doesn't change that....the XL pipeline was to take tar sands crude to the refineries in the gulf coast to be refined into gasoline and diesel and was not to bring oil to the US....Econ 101....sell to the highest need to keep up on the industry and ignore the simplistic rhetoric.
    11 Oct 2012, 07:54 PM Reply Like
  • we don't need the oil anyways. this is an "oil traders delight." once they get it out of the USA "the can pay for all the mistakes they blame America for." Buffet is absolutely right: put it on rail cars, keep it domestic. Make WALL STREET pay its own way now.
    11 Oct 2012, 08:23 PM Reply Like
  • we are so OVER oil now. The DOE has had enough of the phucking bullshit. If they go all in on solar panel production...well, look above! i believe that's a solar powered direct drive vehicle on Mars currently giving the speculators the middle finger....
    11 Oct 2012, 08:25 PM Reply Like
  • You are about 20 years early but you have a point :). Cheers.
    11 Oct 2012, 08:38 PM Reply Like
  • 'pipeline you speak of would carry a type of oil produced in Canada that contains highly corrosive chemicals"


    even if this was true, but it is not. it be just like saying, lets not build highways because the friction from cars tiers wears them down and they unusable after a few years!
    12 Oct 2012, 01:20 AM Reply Like
  • I think that most so called Republicans spin the dial, adopt an attitude, and cherry pick anecdotal "facts" to support their bias. What's wrong with careful research and thoughtful consideration before opening mouth and inserting self serving silver foot?
    12 Oct 2012, 02:03 AM Reply Like
  • I didn't say don't build it, I said build it right.
    12 Oct 2012, 07:53 AM Reply Like
  • I think the US is using less oil then it has in ten years and producing more and the price is still high, thanks to the manipulators who usually are from the right.
    11 Oct 2012, 04:38 PM Reply Like
  • Really, like who? I love all these "straw man" arguments from people who THINK they know something.
    11 Oct 2012, 05:13 PM Reply Like
  • facts are facts. TXU is a privatized nuclear utility! CRAZY! These folks want to start speculating in ENERGY futures...meaning electrical contracts. Trust me...the point is not to keep prices down. How else to pay for that massive debt they needed to take her private? Stay long Duke, FPL, WEC, etc...they play by the Government interest rules to the maximum extent allowed.
    11 Oct 2012, 08:28 PM Reply Like
  • You are making a wrong assumption that the cost of production has stayed the same...wrong....the easy 1000 ft wells is now a 5-15,000 ft well....the old wells were only we can make 90┬┤ you its the greedy oil companies....I recommend you buy their stock then...
    12 Oct 2012, 08:29 AM Reply Like
  • Less manipulators more market deregulation and the increasing use of commodities as value stores against perceived currency debasement.
    12 Oct 2012, 11:02 AM Reply Like
  • Actually, Guardian3981, President Clinton is the one who merged BP/Amoco, Chevron/Texaco, Exxon/Mobil etc. He took a competitive market and turned it into an oligopoly. He and Gore wanted higher prices for gasoline because that is what the environmentalists wanted and they got them.
    11 Oct 2012, 04:56 PM Reply Like
  • All I ever hear is that the Right did this and the Left did that! Lets all grow up and use common sense Center ideas. Banish all extremists, Right or Left!!!!!!!
    11 Oct 2012, 05:04 PM Reply Like
  • I love how the powers that be play the stooges of the right and the stooges of the left off of each other while they appropriate all there is to be had.


    Patrick Henry nailed it: "United we stand, divided we fall. Let us not split into factions which must destroy that union upon which our existence hangs".


    Divided we are falling.
    11 Oct 2012, 06:35 PM Reply Like
  • Perhaps you need to tell that to the "Divider in Chief"!
    11 Oct 2012, 08:11 PM Reply Like
  • yes, yes.... divide and conquer.... who first got credited with saying that?
    11 Oct 2012, 09:06 PM Reply Like
  • Thank you for confirming my point Lakeaffect.
    12 Oct 2012, 09:33 AM Reply Like
  • This would certainly help the trade deficit.
    11 Oct 2012, 05:32 PM Reply Like
  • It's already doing so. We are a net exporter of distillates.
    11 Oct 2012, 07:56 PM Reply Like
  • It will pull up WTI prices to the level of Brent. Will certainly help the trade balance, but it's just one more step in aligning our standard of living to a level more akin to that of the Venezuelans or Chinese.


    Not to say we shouldn't have seen this decline in living standards coming for a couple of decades or more.
    11 Oct 2012, 08:15 PM Reply Like
  • It can 'pull up' WTI as you say or 'pull down' Brent.


    The question will be who is buying it. Europe is heavily captive to Brent and I suspect putting WTI on its market is more likely to pull Brent down.
    12 Oct 2012, 11:05 AM Reply Like
  • We could join OPEC!
    11 Oct 2012, 08:00 PM Reply Like
  • I think the article's headline is a lie. US will remain a net importer.


    Much North Dakota oil is "exported" to Canada to get into the big pipeline that comes right back into the US. It's mostly paperwork.
    12 Oct 2012, 05:41 AM Reply Like
  • I agree and would add that the only way US will end up a net exporter of crude is if we make Canada the 51st state, at least in the short term. The issue is less imports more where they come from.


    It's approx 2m barrels that come from the middle east on average or thereabouts, that's a number we can likely wean ourselves off of. Of course, we buy there for more than economic reasons, and those reasons are unlikely to dissappear short term.


    Anyway, reports out that Iraq may reach 6mln barrels by 2020 , compare that with a pre Saddam high of under 2mln and a current production of 2.7mln. Then there's Libya, who's production the West has also basically taken control of. There should be similar growth there compared to the Qaddafi production.


    There are geopolitics at play that encourage us to 'trade' for their oil, and those haven't and likely won't drastically change anytime soon.
    12 Oct 2012, 11:12 AM Reply Like
  • kmi: So do you believe oil prices are headed lower due to the forces you outline above?
    12 Oct 2012, 02:29 PM Reply Like
  • I'm consistently bearish on oil over about $80-85.


    You should note I was practically emotionally scarred when oil broke that level several years ago as it absolutely crushed my business sending it into the red for two years (2008-2010).


    In '08 virtually none of the largest property managers in the greater NYC area were hedged and everyone got hurt pretty bad, I attribute part of the meteoric rise in oil precisely to the fact that everyone was buying spot and fuel conversions were just not available.


    Since then, I've seen nothing BUT conversions. The oil companies are doing them, the plumbers are doing, all the property managers are doing them. And demand for NG is growing but capacity is unavailable, that's why we still use oil, the utility asks us to switch over to oil during high demand.


    At the same time every demand metric for oil is decreasing, from transportation, to utility use, commercial consumption, etc. Over the past few years, however we've encountered a few interesting events keeping oil afloat, like for example Japan's Tsunami. A lot of electricity demand capacity was replaced with diesel. So it was in Myanmar as well. In fact most times after a natural disaster there is a spike in diesel as its the most portable form of generation. I can't speak specifically to the size of the demand generated by those events, but you had inflexible demand in the face of constrained supply. And that can happen again, but that's the nature of transition: it's bumpy.


    I think the headwinds against oil are huge, short term Japan is just in the process now of powering off its diesel generators and returning to nuclear while growing coal/gas capacity, for example, and any resolution of the Iran situation is going to put a ridiculous amount of oil currently sitting in tankers back on the market in hurry.


    Longer term the demand destruction is outrageous. A lot of commercials are still in the process of cutting back on oil amongst other expenses in the face of stagnant revenue growth but mostly because gas is 50% cheaper. It's a drawn out process because it's capex and a lot of folks expected oil was in a temporary spike.


    But it amazes me how sticky oil has been over $80 - I've been buying oil for almost 20 years in a variety of economic conditions and I find just how far oil has broken with its prior history in the past 4 years amazing.


    I can't even begin to describe how many catalysts I see from how many different sides pushing down oil, but one thing I know for sure is that I don't know if I can time it. But the absolute answer is yes, it has to.


    You take all the energies and put them together, and oil is grossly overpriced next to all of them, it sticks out. It has certain conveniences, like I described above, and that's one reason it's been sticky. Another is the folks who use it as a currency hedge, or the perma-longs who view it as an asset class like gold; another is commodities market deregulation in 1999-2000. Another is that people still use the bubble number of $147/barrel in their trading models.


    In the meantime all the gas producers - (CHK) comes to mind - in the US are increasing their oil production, US is at a 14 year production high, Europe and S. America are transitioning - albeit slowly - to nat gas for transportation, most of SE Asia is growing energy production in anything but oil based capacity.


    So I don't think oil can stay sticky forever, and I think - even though like I said I don't like to time it because I have absolutely been wrong before - at the end of this heating season we will see an inflection point in oil.
    12 Oct 2012, 02:58 PM Reply Like
  • It's funny you mention that as I see $80-85 as the floor for oil going forward. No real data to back that up, just my gut feeling.


    I back up the truck in 09 on XLE, XES and a variety of oil stocks when the bbl cost was around $50. Only RIG has turned out to be a complete dog.
    12 Oct 2012, 03:12 PM Reply Like
  • I agree its probably the floor:


    Recent swing low under it was $77 on 6/28 followed by a hard $7 move up on demand, so there's definitely interest in that area.


    And there's the rub: I think there's a lot of consumers (as in, not traders, heh) are happy buying at under $80 and will do so immediately anytime crude price moves there.
    12 Oct 2012, 03:30 PM Reply Like
  • Thanks for the info, kmi!
    12 Oct 2012, 05:30 PM Reply Like
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