America’s crude oil production has surged 70% since 2009. And that’s left E&P firms scrambling to find markets to sell this supply.
There may be one more option emerging on that front, judging from news late last week.
A group of 21 U.S. senators has reportedly sent a request to the national Secretary of Commerce. Asking that the Obama government consider allowing American crude to be shipped south to Mexican consumers.
The formal letter was triggered by a request from an affiliate of Mexican state oil firm Pemex. Which is asking that it be allowed to swap 100,000 barrels per day of heavy Mexican crude for light oil and condensates produced in the U.S.
Under existing trade law, such swaps can be approved by regulators on a case-by-case basis. With the group of senators asking that the deal be given permission to proceed.
But the senators went further in their request letter. Suggesting that the Obama administration should consider allowing wholesale exports of U.S. crude into Mexico.
They pointed to the fact that a similar exemption to the U.S. oil export ban has been granted to Canada. With shipments north of the border having been allowed since Reagan administration approval in 1985.
If a Mexican export exception was granted, it would be a very significant development for the E&P sector. With cross-border flows almost certain to provide a sizeable outlet for surging U.S. supply — and possibly help to raise North American prices.
Of course there’s no guarantee that any such approval will come as a result of the senators’ request. For the moment, this is a development to keep one eye on, pending further rulings from Commerce.
Here’s to going south, young trader,
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