- This is the script of CNBC's news report for China's CCTV on December 17, Thursday.
Welcome to CNBC Business Daily, I'm Qian Chen.
The end of the 40-year-old ban on crude oil exports should have little immediate impact on the U.S. oil industry, but longer term it's likely to help U.S. shale producers and give the United States more clout in a cut-throat, global energy arena.
The United States currently generates about 9.2 million barrels of oil a day, about half of which is shale production. But the U.S. also imported about 7 million barrels a day this year, so with the world awash in crude, there is not likely to be much demand for U.S. exports.
The U.S. is on the verge of ending the restriction, after congressional negotiators late Tuesday included removing the ban in a deal on a $1.15 trillion spending bill, along with such provisions as the extension of tax breaks on solar and wind energy. And while an end to the ban wouldn't have a massive immediate effect on oil markets, it could drastically alter some parts of the domestic and global energy industry in the longer term.
While new oil exports likely would not amount to much immediately, they would provide another challenge to already fractured OPEC. The Organization of the Petroleum Exporting Countries has been allowing market forces to set prices for the past year, abandoning its previous policy of manipulating prices through the use of output quotas. That policy has cut into some U.S.production, but the world is still overproducing by more than 1 million barrels a day, and Iran could start reintroducing barrels to the market early in the new year.
OPEC secretary general Abdalla El-Badri said Wednesday that there would be no market impact from U.S. exports because the U.S. is an importing country.
However, exporting U.S. crude could alleviate some imbalances in the world oil market. For instance, the U.S. has already approved limited exports of U.S. light sweet crude to Mexico. Mexico uses the lighter grade in its refineries, while it exports heavier crudes to the U.S. Gulf Coast refineries. Those exports now could be unlimited.
"Venezuela is likely to snap up some of these barrels, too, to mix with their heavy crude to make a more marketable blend," said Kilduff.
"Conceptually, the losers are the refining industry in particular. They had a more captive source of supply that's now less captive. Given where spreads are, there's not that much difference in the near-term numbers. You're not going to dramatically change your refiner estimates, but directionally, refiners lose a source of captive supply, and then I think the U.S.
producers have to ultimately be a winner because they're less trapped. They have more potential buyers of product."
Transporters of crude would also benefit, he said.
Lipow said the lower Brent price could make it more attractive for East Coast refiners to import African light sweet crude, a negative for North Dakota producers, which now ship crude east by rail. Refiners in turn could be hurt because of the captive cheap oversupply in the U.S. will ultimately find its way to other markets.
The immediate impact of the news has been to narrow the spread between West Texas Intermediate crude and more expensive Brent oil, the international benchmark. In the case of the March futures contract, WTI was trading above Brent early Wednesday.
CNBC's Qian Chen, reporting from Singapore.