U.S. Demand to Export Crude Seen Soaring Amid Hydrocarbons Boom

Demand to export U.S. crude is poised to soar as the nation’s surging supply of hydrocarbons creates a glut of the feedstock, according to Citigroup Inc., the bank that predicted a slump in the nation’s imports.

Oil companies will apply for government permits to sell crude overseas by 2015 and some may do so immediately, Edward Morse, Citigroup’s New York-based head of commodities research, said in a report yesterday. Shipments of refined oils such as gasoline, as well as liquefied petroleum gas, piped gas, and coal are now the same level as those of transport equipment, making hydrocarbons the joint-largest U.S. export, Morse said.

While the U.S. bans most crude exports under decades-old laws, a glut of the feedstock is adding pressure to export it from the Gulf of Mexico, Morse said. The nation’s refining hub has the capacity to process about 1.5 million barrels a day more light, sweet oil and its crude production has expanded by 1 million barrels a day in each of the past two years, he said. Light, sweet grades are less dense and contain less sulfur, making them useful for making fuels such as gasoline.

“The current crude glut on the U.S. Gulf Coast will continue to spark requests for crude oil export licenses and a positive but restricted response is inevitable,” Morse said. “Applications for exports should start to soar.”

The Citigroup analyst predicted in December 2011 that America’s net oil imports would slump 60 percent by 2020 because of slowing consumption and rising production. The nation’s net shipments at the time were 9 million barrels and they averaged 7.8 million barrels so far in 2013, Energy Department data show.

Brent-WTI

The surge in energy production is driving down crude costs for U.S. refineries. West Texas Intermediate oil this year cost an average of $10.15 a barrel less than Brent, the international benchmark. Brent cost an average of $2.16 a barrel more than WTI in 2003.

Oil companies may be able to export crudes where laws governing such transactions aren’t clear, Morse said. President Barack Obama can also allow shipments in the national interest, the Citigroup analyst said. The Commerce Department’s Bureau of Industry and Security can also license sales while there are signs that the U.S. could allow crude swaps with foreign suppliers, he said.

Venezuela, Mexico and Colombia all might benefit from swaps of U.S. light crude for heavy oils, Adam Sieminski, administrator of the Energy Information Administration, the Energy Department’s statistical arm, said Oct. 29. A U.S. light crude swap for heavy probably wouldn’t threaten energy security, he said.

To contact the reporter on this story: Alaric Nightingale in London at anightingal1@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net

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