Oil prices have been rallying this week on hopes of a supply cut from OPEC.
But even without a rise in the global price, news this week suggests things are looking up for producers — especially those in America’s prolific shale plays. With buyers in one unexpected part of the world stepping up to buy a big batch of exported U.S. shale oil.
South Korea.
Platts reported Monday that South Korean refiner GS Caltex has purchased a million barrels of U.S. crude for delivery this December. With the supply slated to come from producers in the Eagle Ford play of south Texas.
The purchase is particularly significant given that Caltex already bought a previous batch of 1 million barrels of Eagle Ford oil. Which was bought in July, and reportedly delivered to Caltex’s Korean refining facilities this past weekend.
The fact that the refiner is now going ahead with a second purchase is encouraging. Suggesting that the company likes what it sees in the crude it has received — which officials said is being used to blend with heavier crudes before the refining process.
All of this is of course possible because of the lifting of the U.S. crude export ban late in 2015. With these shipments representing a toe in the water for refiners in the key Asian market, testing how America’s shale oil may fit in the overall global refining picture. Related: Is Iraq Coming Back To The OPEC Deal?
Given the apparent success here, this could be a prelude to more U.S. oil heading for Asia. With Caltex officials saying they are eager to diversify their crude imports away from their former go-to suppliers in the Middle East.
All of which is good news for U.S. producers. Which could see local prices lifted if imports continue to grow — especially for plays like the Eagle Ford, which are optimally positioned for exports through the Gulf Coast.
Watch for more deals coming for U.S. crude — and for overall figures on exports, from sources like the Energy Information Administration.
Here’s to shipping it.
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By Dave Forest
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