The Biden Administration is urging American refiners to limit their fuel exports amid multi-year low domestic inventory levels, according to a letter U.S. Energy Secretary Jennifer Granholm sent to seven big refiners obtained by The Wall Street Journal.
U.S. fuel exports have been rising in recent months as countries in Europe and some in South America are looking to source alternatives to Russian fuel. In Europe, the looming EU embargo on Russian crude and products is prompting traders to source growing amounts of diesel from non-Russian sources. The U.S. has been one such source, and its exports hit 1.4 million bpd in July, the highest in five years. A lot of the increase is coming from Europe.
However, the U.S. Administration is now urging refiners to curb exports in order to raise inventory levels at home.
"Given the historic level of U.S. refined product exports, I again urge you to focus in the near term on building inventories in the United States, rather than selling down current stocks and further increasing exports," Secretary Granholm wrote in a letter to seven American refiners this month.
"It is our hope that companies will proactively address this need," she added in the letter obtained by the Journal.
"If that is not the case, the Administration will need to consider additional Federal requirements or other emergency measures."
Limiting exports at a time when global demand for non-Russian oil and fuels is high would only drive up oil prices, analysts say.
According to U.S. refiners, there isn't much room for a further increase in diesel shipments from America to Europe going forward.
Gary Simmons, Executive Vice President and Chief Commercial Officer at Valero Energy, said on the Q2 earnings call last month that "It's going to be a real challenge for us to be able to supply a lot more diesel into Europe."
With U.S. inventories low and "the industry basically running all out," "it's very difficult for me seeing that there's going to be a lot of flow from the U.S. into Europe," Simmons added.
By Tsvetana Paraskova for Oilprice.com
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