Oil extends pre-Christmas rally in Asia after US report

With internationally traded Brent futures trading at $37.60 a barrel, United States crude defended a premium it regained this week for the first time in around a year. “I am talking about $90-100 per barrel”, the CEO of Gazprom’s oil subsidiary said this week. It fell to $35.98, an 11-year low, on Tuesday. South Korea’s trade, industry and energy ministry said this week the country’s refiners were hoping to diversify their suppliers and are looking to import U.S. condensate as light oil supplies in Asia were tight.

The rush on Cushing, Oklahoma – the largest oil storage in the U.S. and a hub for the West Texas Intermediate benchmark – overwhelmed the economy and caused unusual spread between domestic WTI and global Brent benchmark crude. USA oil companies called the lifting of the export ban a game-changer. USA markets close early Thursday, Christmas Eve, and are shut Friday for Christmas Day.

“We are excited to announce our first contract to export USA crude oil, which to our knowledge may be the first export cargo of USA crude oil from the Gulf Coast in nearly 40 years”, said A.J.

The battle between proponents and opponents of crude oil exports started when it became obvious that the United States refining and transportation sector is unable to process excessive production from seven major shale plays. The US has ended its export ban after nearly 40 years.

USA crude futures jumped US$1.32, or 3.6 per cent, to US$37.45 a barrel on the New York Mercantile Exchange. “It is holding steady at 9.179 million barrels a day, which we had initially expected to see further cuts with low oil prices”. “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 impact of oil exports is more disputed, though; with worldwide prices at a seven-year low, the Energy Information Administration said little oil, if any, is likely to be exported for years.

The Organization of the Petroleum Exporting Countries (OPEC) in a report on Wednesday forecast that demand for its crude would be lower in 2020 than in 2016 as rival producers prove more resilient than expected in a low oil price environment. A further decline of $5-15 may imply that it will go in the $20-30 per barrel range.

It is also, however, a reflection of some of the detail of the Opec report. Iran is due to return to the global energy market. “Demand growth should remain solid, but inventories will remain an overhang to markets for much of the year”, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management. Brune said that Democrats won a few consolation prices in the budget Obama signed: a 5-year renewal of tax credits for solar and wind-energy projects, and money for a water and land conservation fund.