US oil export ban repeal could pressure Brent prices lower

It would be included as a provision in the year-end tax and spending bill now before Congress. Louisiana Congressman Steve Scalise is pushing for the change.

“It’s just more oil being introduced into a wildly oversupplied market”, said John Kilduff, partner with Again Capital.

Don’t let the real impact of the ban’s lifting on the Bakken get lost in the generalized story about energy independence, policy fairness or its impact on global oil prices.

An analyst note from RBC Capital Markets today speculated that the likely destination for exports would be countries like Venezuela, which now imports light sweet crude from West Africa to blend with its ultra-heavy grades, and Mexico, given that the country’s refining sector is better geared to handle light crude grades as opposed to the heavy crude produced domestically. The Organization of Petroleum Exporting Countries put into place an oil embargo after the USA sided with Israel in the Yom Kippur War and the price of oil spiked from $3 to $12.

During intraday trading on Wednesday, the spread decreased to less than $1 a barrel, the smallest since January.

Rep. Joe Barton (R-TX) spearheaded efforts to pass legislation ending the ban in the House earlier this year (see Daily GPI, Oct. 8; September 17).

“I’ve always been supportive of standalone legislation to lift the ban as my bill would have done, but I’ve long said that to actually build strong bipartisan support to end this outdated ban, we needed to reach a deal to bring along enough of my fellow Democrats on items like long-term extensions for renewable energy and conservation measures”, Heitkamp said.

Keep in mind that most US refineries are against reopening oil exports, arguing that they would be hurt if crude oil is shipped overseas to be refined.

Refiners have been the biggest beneficiaries of the shale boom, using cheap oil and gas to run their plants at record rates and make the US the world’s largest exporter of gasoline and diesel.

Exporting crude also could keep more drills running and more American workers in the oil fields. That would have cost the region thousands of blue-collar jobs.

Ryan, speaking to a breakfast sponsored by Politico, said lawmakers were putting finishing touches on the massive spending bill and affirmed his view that there would be no government shutdown at the current midnight Wednesday deadline.

A senior Democratic aide, speaking on condition of anonymity, said negotiators have not yet resolved Democrats’ demand for a five-year tax credit for solar and wind power in exchange for lifting the 40-year-old crude oil export ban.

But having won their victory, few of those companies are saying they will ramp up exports immediately. “When we are restricted from exporting (oil) in essence our competitors – like OPEC, Venezuela and Russian Federation – have an advantage on us”, Hoeven said.

Nicole Friedman contributed to this article.