Crude oil prices settle higher in futures market

February West Texas Intermediate oil futures on the New York Mercantile Exchange were up $1.51, or 4.2%, at $37.66 a barrel.

The oil industry received a psychological lift when President Barack Obama last week signed a $1.1 trillion spending bill that also included a provision to allow the U.S.to export crude oil after a four decade ban, but it’s going to take a while for the black gold to begin flowing to the coast and overseas.

The predictions turned out correct, and even slightly pessimistic: after trading at a significantly lower price than Brent since around 2010, WTI reached parity today (December 23) at around US$36.5 a barrel, as WTI enjoyed the export ban removal boost and Brent continued its prolonged downward trend. “Let’s suppose they start exporting 1 million barrels of crude a day”. US production increased by 74 percent from 2008 to 2014, according to The Wall Street Journal.

“What has developed is that traders have shorted WTI US Oil to an extreme such that there are few longs left in the market, as you can imagine, a reversal often happens when all the sellers have exhausted their downside exposure, but that could now move to the global counterpart of Brent or UK Oil”, wrote Tyler Yell at DailyFX.com, in a blog post. Crude oil is now classified as EAR99.

Though price parity means United States oil will not be perceived as more competitive than OPEC oil from a financial standpoint, the addition of the light crude oil produced by the U.S. to global markets will increase the mix of oil available to various refineries around the world. As a result, the benefits for accessing foreign markets are now minimal for USA producers.

Goldman analysts said that a higher than expected 1.5 million barrels a day global market imbalance in this quarter is likely to extend into the first half of 2016 because of milder than usual weather weighing on demand. “We’re about to see a whole raft of mergers, consolidations and bankruptcies, because they can’t produce oil profitably at these prices”, he said. The Department of Commerce issued an official notice on Tuesday saying companies no longer need to apply for licenses to export crude.

Jacob Dweck, an attorney with law firm Sutherland, which represents oil producers, said some producers and shippers “are interested in flying the flag of exports….” World crude oil prices were above $100 per barrel when Murkowski first laid out the rationale for changing the policy.