EIA sees little benefit if US exports crude

HOUSTON (ICIS)–Removing restrictions on the export of US crude oil is unlikely to improve producer margins, a new report from the Energy Information Administration (EIA) revealed on Tuesday.

The EIA report found that regardless of whether crude export restrictions were lifted, the price of West Texas Intermediate (WTI) would remain around $6/bbl below Brent crude.

A variety of energy models were used to explore future implications of removing US crude oil export restraints. The report builds on and extends previous EIA studies exploring the consequences of growing domestic crude production.

The EIA found that in cases where the Brent-WTI spread grew beyond $6-8/bbl, removal of crude export restrictions would actually result in higher wellhead prices for domestic producers – who, in turn, would respond with additional production.

Any increase in domestic crude oil production that was not offset by reduced production outside the US would also represent an increase in global crude supplies, which would place downward pressure on global crude prices, the EIA said.

In addition, the EIA said petroleum product prices in the US, including gasoline prices, would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports.

If domestic producers were to respond to higher WTI prices with increased production, the global supply/demand balance would become looser, unless production was fully offset by production cuts elsewhere.

A looser balance would also imply lower Brent prices, which would result in lower petroleum product prices for US consumers.

Refiner margins would also take a hit in the absence of crude oil export restrictions, as export restrictions in high-production cases allow for a wider Brent-WTI spread.

For owners of existing refining capacity, a wider Brent-WTI spread provides higher margins, as refined product prices continue to move with global crude prices.

The report concluded that while unrestricted exports would either leave global prices unchanged or result in a small price reduction, other factors affecting global supply and demand would “largely determine” whether global prices remain close to their current level or rise.