US oil prices climbed in Asian trade yesterday following a report that the US, the world’s top crude consumer, has lifted a four-decade ban on exports.
US benchmark West Texas Intermediate (WTI) for August delivery rose US$0.69 to US$106.72 in early afternoon trade. It had slipped US$0.14 in New York trade. Brent crude for August eased US$0.21 to US$114.25.
The Wall Street Journal reported late on Tuesday that Washington has “cleared the way for the first exports of unrefined American oil in nearly four decades.”
Citing rulings that have not yet been announced, the newspaper said the US Department of Commerce has given two companies — Pioneer Natural Resources and Enterprise Products Partners LP — permission to ship a type of ultralight oil known as condensate for foreign buyers.
The shipments could begin as soon as August, the paper said, citing people familiar with the matter.
“There have been some expectations for the ban on exports to be lifted and investors will now be watching to see if transportation links are up to mark to move supplies,” Desmond Chua, market analyst at CMC Markets in Singapore, told reporters.
Pressure has been building for a year for the US government to end the 1970s ban on exports, an energy security measure long seen crucial in a country heavily dependent on oil imports to meet domestic needs.
However, the surge in production from shale-based deposits in areas like North Dakota and Texas, made possible by advances in hydraulic fracturing technology, has sharply reduced the need for imports and created regional surpluses due to distribution bottlenecks.
That has given rise to industry pressure to allow exports from areas like the Gulf of Mexico, even as the country imports crude through east coast ports.
Producers have long been clamoring for the US government to lift the ban on exports with crude stockpiles near record levels, but less-than-satisfactory transportation links could still hinder the outflow of supplies from storage hubs.
The US-to-Canada Keystone XL pipeline project has pitted environmental groups against the oil industry, which has argued that it will bring much-needed jobs and help fulfill the US goal of energy self-sufficiency.
Chua said investors are still monitoring the crisis in crude producer Iraq, despite fading fears that it could result in a major supply disruption.
“Unless we see any major disruption to Iraqi oil assets in the south, we aren’t going to see further risk premium associated with the crisis,” he said.
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