Houston, 8 January (Argus) — US exports of crude – currently banned with a few exceptions – will become a “a big policy issue” for lawmakers to wrangle with as rising domestic production causes a pile-up of light, sweet crude on the Gulf coast, the head of the Energy Information Administration (EIA) said today.
“We are very shortly going to be faced with no place to move those crudes without some very significant changes in transportation in the US,” EIA chief administrator Adam Sieminski said. “That's an issue policymakers are going to be faced with fairly quickly.”
Too much US oil production could further widen the Brent-West Texas Intermediate spread beyond the agency's forecasts and force crudes like Louisiana Light Sweet (LLS) out of the Gulf of Mexico into a steep enough discount that production becomes uneconomic, he added.
Booming US crude volumes have raised concerns that supply of light, sweet crude will soon overwhelm the domestic refining appetite for it, forcing prices lower. Shippers hoping to export crude must obtain waivers from the US Commerce Department, which allow for limited exports of some Alaskan crude, California heavy crude and reciprocal shipments to Canada.
Gulf coast terminal operators have previously told Argus that shippers are interested in exporting crude from Texas and Louisiana docks, and industry players have voiced support for lifting the ban. Companies also increasingly use rail out of North Dakota and Jones Act-compliant tankers originating at the Gulf coast to move light, sweet shale crudes to the US Atlantic coast.
The EIA today said in its Short-Term Energy Outlook (STEO) report it expects US crude production will again break the all-time yearly growth record in 2013, jumping 890,000 b/d to average 7.32mn b/d, after growing an anticipated record of 780,000 b/d to 6.43mn b/d last year. It also expects the Brent-WTI spread to average $16/bl in 2013 – though the differential will fall to $11/bl by December – compared to $18/bl last year. The Brent-WTI spread is expected to narrow sharply to $8/bl in 2014 thanks to the startup of new midcontinent-to-Gulf coast pipelines.
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