For both US crude producers and refiners, local crude price differentials will become much more important. When refining profits are more in line with the tough margins in the rest of the world, producers and refiners will be watching WTI basis differentials with an eagle eye.

US crude exports

Finally, let’s turn to the likelihood of a US exports boom, the focus of attention for the rest of the world. Outside the US, there is a sense that US oil might be about to start competing with you, or competing to supply you.

But how likely are things to change, really? For a start, the US has already been supplying millions of barrels per day of diesel, gasoline, LPG and lightly treated condensates to the world for several years already,

For a country with a reputation for having a crude ban in place, the US already exports more crude than most non-OPEC nations. Thanks to approved licenses to export, primarily to Canada, the US regularly exports close to half a million barrels per day of crude oil. Comparing this to previous years, we can see that the US has already become a major crude exporter, almost by stealth.

Theoretically, unfettered US crude exports could begin shortly after Obama signs the bill into law. Economically, that probably doesn’t make sense.

If we remove exports to Canada, we can see that licensed US crudes have so far struggled to find markets outside of Canada. Most of these destinations like Switzerland, Singapore, South Korea, and the Mediterranean are already well served with supplies closer to hand.

US crude exports are already well below the recent peak of 600,000 barrels per days. Markets move quickly, and we believe that the steadily narrowing Brent/WTI spread of recent months has already generated stiff headwinds for US exports, even before exports are fully liberalized.

Most likely the biggest impact on exports of this deal is that recent clearance granted to export plant condensates will become redundant and relatively complicated arrangements like the Obama administration’s October approval for Mexico’s Pemex to swap up to 75,000 b/d of its heavy Mexican crude for an equal amount of US light oil, will simply fall by the wayside, overtaken by full liberalization.

In case US exports do somehow begin to surge, we shouldn’t forget that provisions have been made for controls to be brought back into place if things seem to be getting too hot. The recent deal allows any president of the US to impose export-licensing requirements on crude for up to a year at a time if certain conditions are met. These conditions include national emergencies, sanctions, supply shortages and sustained high domestic oil prices, according to the bill.

In conclusion, within the US, there will be big winners, most prominently the WTI benchmark, and some who experience real pain, like US refiners.

In the main, and as is often the case, the world’s markets seem to have priced most of these developments in, already. Economically viable oil exports found their way to market either through deals with Canada or as refined products.

It seems more likely that refiners in Europe and Asia will be weighing up offers to buy crude from Iran and Iraq long before they turn their attention to what it would cost to get their hands on big volumes of Eagle Ford Shale, or any other US crude or condensate.

This particular deal is a once-in-a-generation shift in the world oil markets. The lifting of crude export will long be remembered as an exclamation mark, powerfully punctuating the end of the US’ remarkable mental journey from oil importer to oil exporter, and serving as a call to the rest of the world to be ready for a new US mindset, when prices do eventually recover.

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