U.S. OIL EXPORTS DOUBLE RESHAPING VAST GLOBAL MARKETS
Rising American oil exports are a disruptive new force in the global markets, reports Lynn Cook.
Since Congress lifted a ban on oil exports at the end of 2015, shipments out of Texas and Louisiana have skyrocketed, taking the fruits of the U.S. fracking revolution to new markets.
For the past few years American oil has flowed to more than 30 countries, with China, Colombia and the U.K. emerging as big buyers.
“The U.S. exported 1 million barrels of oil a day during some months so far this year—double the pace of 2016—and is on track to average that amount for all of 2017,” the Journal reports.
U.S. drillers are expected to ramp up production at a pace to surpass 10 million barrels a day, a new record, by 2018.
The U.S. exports are also benefiting in part from a decision by the Organization of the Petroleum Exporting Countries to temporarily reduce output with the aim of rebalancing the oil market.
While U.S. oil flows make up just 1% of global oil volumes, the addition of American oil is complicating OPEC’s efforts and is helping to tamp down global oil prices.
“China, the world’s largest oil importer, traditionally gets more than half of its crude from OPEC members like Saudi Arabia, Angola and Iran. But China, which imported a record 8.6 million barrels a day in December 2016, is stepping up imports of U.S. oil, as well as crude from Brazil, after its own production dropped significantly,” the Journal reports.
RUSSIA COULD BUY BACK STAKE IT SOLD IN ROSNEFT
Russia included a buy-back option into its deal to sell a portion of state oil firm PAO Rosneft to Qatar and Glencore last year, write Sarah McFarlane and Summer Said.
“Russian President Vladimir Putin hailed the €10.2 billion ($11.5 billion) sale of one-fifth of the Rosneft stake in December as a sign of investor confidence in his country. “But the people with knowledge of the deal say it functioned as an emergency loan to help Moscow through a budget squeeze,” the Journal reports.
The arrangement contained a provision that Moscow would buy back a portion of the stake from Qatar in the next 10 years.
“Rosneft, the world’s largest listed oil producer, is traded publicly in Moscow, but it isn’t easy to buy and sell large pieces of the company because it remains majority-owned by the Russian state and is an instrument of economic power for Mr. Putin,” the Journal reports.
The deal happened because of the downturn in oil which hurt Russia’s economy and forced Mr. Putin to raise cash in 2016 to plug a widening budget deficit. Russia’s federal budget relies on the oil-and-gas industry for about a third of its revenue.
Kremlin spokesman Dmitry Peskov said he didn’t agree with the characterization of the deal as an emergency loan. He didn’t respond to further questions.
Glencore and the Qatar Investment Authority said the deal’s contract contained no right for Russia to buy back Rosneft shares from the consortium they created.
OIL IS UP AHEAD OF U.K. ELECTIONS
Global oil prices recovered slightly on Thursday, after posting their sharpest fall since early March overnight on an unexpected build in U.S. crude inventories last week.
Brent crude, the global oil benchmark, rose 1% to $48.53 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.9% at $46.14 a barrel.
Investors are also watching for several major developments on Thursday including a European Central Bank meeting, the testimony in the U.S. by former FBI Director James Comey and a general election in the U.K.
The outcome of the election will likely determine the country’s strategy for exiting the European Union, after a campaign colored by three terrorist attacks in as many months. The result could also affect the U.K.’s relations with its closest allies including the U.S.