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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Official: The U.S. Oil Export Ban Is (Sort Of) Over

Big news for the U.S. oil market last Friday. Showing that one of the longest-standing regulatory hurdles in the business is now starting to fall.

That's the ban on exporting U.S. crude. Which according to reports is now history -- at least when it comes to one of America's closest neighbors.

Mexico.

Since February, the U.S. Commerce Department has been considering applications to swap American crude oil with Mexican crude. And late last week, senior officials told Reuters they are now "acting favorably" on such permits. Related: PV Solar Could Have Some Serious Competition

Bloomberg confirmed the story, citing officials from Mexican state oil firm Pemex -- who said that crude oil swaps between the two countries have now been approved.

The swap will initially cover about 100,000 barrels of crude. And will see light oil and condensate from America exchanged for heavy oil from Mexico.

This of course isn't an "export" in the strict sense. But it does have a number of benefits for U.S. oil producers and end users. Related: August Is Unlikely To See A Recovery In Oil Prices

That's because much of U.S. refining infrastructure is configured to run heavy crude -- which used to be imported largely from Venezuela.

But the U.S. shale revolution has resulted in a flood of light oil production across the country. With this crude in many cases having difficulty finding refining facilities that can handle it.

In some cases, that's caused sales delays -- and forced producers to sell unwanted light oil at discounts. A flip on the global market, where light oil tends to command a premium to heavy crude. Related: What’s At Stake As The Oil Glut Continues

But the new swap arrangement now allows American producers to sell light oil to eager Mexican buyers. And in exchange obtain greater volumes of heavy crude from Mexico, which refiners can utilize.

It looks like a win-win. Watch for rising profits for both E&Ps and refining firms if this trend continues to gain steam.

Here's to oil's well that ends well.

Dave Forest

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  • John Delano on August 19 2015 said:
    Companies in the Permian Basin are not tight shale "frackers."

    In the Permian you have "old fashioned " oil well. The original vertical wells drilled in the Permian obtained oil from sand layers, highly permeable.
    These vertical low out put wells were dumped by big oil, and the Pxd, line and Bbep companies turned to converting vertical wells to 7,600 foot laterals, horizontal well.

    Output of each well now is 1,220 barrels per day, and after 30 days still produce 900 barrels per day. The 80 % decline rate for tight shale frackers is only 5% for these Permian wells.

    The rigs are increasing in the Permian, and this area is part of the 900 foot deep inland ocean that existed for 150 million years, in North America.
    See independent.academia.edu, for more details. Ref: Delano.

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