The United States might have lifted its decades-old ban on exporting crude. But don’t expect oil companies here to immediately rush to begin shipping overseas.
Enterprise Products Partners CEO Jim Teague opined in a conference call with analysts Thursday that with historic lows in oil prices the incentive to export simply was not there – at least not for now.
“Today’s price environment, spreads do not generally support significant crude oil exports. However, we believe that as we move out of this cycle, world will recognize the abundance of our resources, the benefits of supply diversification, and they know they count on the U.S. producers,” he said.
In the run up to last month’s decision by Congress to lift the oil ban, the industry and its supporters painted such a move as an aid to a struggling industry. Part of the reasoning was Brent crude, the European benchmark, typically sells at a premium to the U.S. benchmark West Texas Intermediate.
But then there is the cost of shipping the oil overseas, via oil tankers that must cross oceans, braving storms and even the occasional pirate. Also, it can be difficult to find foreign refineries to take U.S. oil, a lighter and “sweeter” grade of crude.
Even before the export ban lifted, companies were given some license to ship abroad, through an oil exchange program with Mexico and a waiver on condensate, an ultra-light form of oil.
And since the export ban has lifted, that flow of oil out of the country has actually shrunk.
According to the U.S. Energy Information Administration, the U.S. exported 399,000 barrels of oil in the week ending Jan. 22., a 25 percent reduction from the same period a year ago.
Overall, U.S. production is sliding under crude prices that were around $33 a barrel Friday, a more than 60 percent discount from the summer of 2014.
Not that there is no appetite for U.S. crude abroad. Earlier this month the Swiss oil trading firm Vitol, partnering with Enterprise, set off from a Houston terminal with 600,000 barrels of American oil bound for Europe.