Official: The U.S. Oil Export Ban Is (Sort Of) Over

Big news for the U.S. oil market last Friday. Showing that one of the longest-standing regulatory hurdles in the business is now starting to fall.

That’s the ban on exporting U.S. crude. Which according to reports is now history — at least when it comes to one of America’s closest neighbors.

Mexico.

Since February, the U.S. Commerce Department has been considering applications to swap American crude oil with Mexican crude. And late last week, senior officials told Reuters they are now “acting favorably” on such permits.

Bloomberg confirmed the story, citing officials from Mexican state oil firm Pemex — who said that crude oil swaps between the two countries have now been approved.

The swap will initially cover about 100,000 barrels of crude. And will see light oil and condensate from America exchanged for heavy oil from Mexico. 

This of course isn’t an “export” in the strict sense. But it does have a number of benefits for U.S. oil producers and end users. 

That’s because much of U.S. refining infrastructure is configured to run heavy crude — which used to be imported largely from Venezuela. 

But the U.S. shale revolution has resulted in a flood of light oil production across the country. With this crude in many cases having difficulty finding refining facilities that can handle it.

In some cases, that’s caused sales delays — and forced producers to sell unwanted light oil at discounts. A flip on the global market, where light oil tends to command a premium to heavy crude. 

But the new swap arrangement now allows American producers to sell light oil to eager Mexican buyers. And in exchange obtain greater volumes of heavy crude from Mexico, which refiners can utilize.

It looks like a win-win. Watch for rising profits for both E&Ps and refining firms if this trend continues to gain steam. 

Here’s to oil’s well that ends well,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

 

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