This is the first year since the 1970s that the United States has exported crude oil, and oil producers are already taking advantage of this new route to market. After Washington lifted the decades-old ban on crude exports last December, U.S. oil has started making its way to buyers abroad as the companies selling those hydrocarbons try to find the best possible price for their product. The EIA reports:
U.S. crude oil exports to countries other than Canada have surpassed exports to Canada in two months in 2016. In March, total crude oil exports to countries other than Canada reached 259,000 b/d, or 10,000 b/d more than crude oil exports to Canada. In May, total U.S. crude oil exports to countries other than Canada reached 354,000 b/d, 46,000 b/d more than crude oil exports to Canada.
Other than Canada, the largest and most consistent U.S. crude oil export destination for the first five months of 2016 has been Curacao, an island nation located in the Caribbean Sea north of Venezuela. U.S. crude oil exports to Curacao averaged 54,000 b/d through May. Petróleos de Venezuela (PDVSA), the state-owned oil company of Venezuela, operates the 330,000 b/d Isla refinery on Curacao, as well as crude and petroleum product storage facilities on the island. Trade press reports indicate that U.S. crude oil exports to Curacao are likely being used as diluent, where a light (less dense) U.S. crude oil is blended with a heavy Venezuelan crude oil, for either processing at the Isla refinery or for re-export to PDVSA customers.
U.S. crude is also making its way to Europe, as the Netherlands has become the third-likeliest destination for our oil, and Japan is quickly becoming an important buyer as well. But remember: unlike our petrostate competitors, here in the United States it’s private companies, not the U.S. government, that is selling this crude. Our allies may stand to benefit from increasing volumes of stable, reliable U.S. supplies in the coming years, but that will only happen if it makes economic sense for the firms exporting these cargoes.
And, for now, it still makes sense. The U.S. benchmark crude price, the West Texas Intermediate (WTI), is currently trading around $46.60 per barrel. Compare that to Europe’s Brent crude benchmark, which today sits at $49.23. WTI has a long history of trading at a discount because the embargo has kept U.S. producers from selling on the global oil market, but now that crude exports are fair game, companies are jumping at the opportunity to sell to buyers at potentially higher prices. That’s also helping to narrow the spread between WTI and Brent (which in recent years has ballooned to a more than $10 difference), which in turn is helping U.S. oil producers struggling to stay afloat in today’s bargain market.