In December 2015, President Obama signed a $1.15 trillion spending bill that gave renewable energy producers a number of concessions in exchange for repealing the crude oil export ban. Refiners lobbied hard to preserve the export ban, while crude producers lobbied to get it repealed.
It didn’t take long for the repeal to have an impact. Through 2015, crude oil exports to Canada — which was exempt from the ban — had been growing. There were also a small number of exports to other countries, which was allowed on a case-by-case basis.
After 2015, the list of destinations for U.S. crude oil exports exploded. In 2015, Canada was the destination for 92% of U.S. exports. By 2018, Canada’s share had fallen to 20%. At the same time, the amount of exported crude soared from under half a million barrels per day to more than two millions barrels per day.
The number of countries importing U.S. crude oil expanded to nearly three dozen. China briefly surpassed Canada as the top destination for U.S. crude oil exports. Last summer China imported more than half a million barrels per day of U.S. crude oil before trade war concerns prompted them to cut off their U.S. oil imports.
But the overall impact of increased U.S. WTI exports was to shrink the discount to Brent that had developed. After 2013, the discount declined for four straight years. By 2016 the discount had almost entirely vanished, which meant that WTI was again trading in line with the international benchmarks.
I believe the evolution of the WTI market can guide our expectations of the growing U.S. liquefied natural gas (LNG) export market. I will cover this topic in the next article.
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