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Banking On Brent-WTI Spread, U.S. To Hit Record Exports In September

U.S. oil exports may hit a new record next month, as oil traders cash in on the widening gap between the price of Brent Crude and West Texas Intermediate (WTI) at a time when the cost of shipping to new destinations slides.

“We believe September will be a new record month for USA crude oil exports,” Ben Luckock, global head of crude oil trading for the Trafigura Group PTE., told Bloomberg in an email exchange.

The difference in price widened to US$2.18 in early morning trading Wednesday, with WTI at US$47.08 per barrel and Brent at US$49.26. The biggest price difference since last year was reached on 17 August, when the gap was US$2.33 per barrel.

Luckock said the Trafigura planned to ship anywhere between 5 million to 7 million barrels to Europe this month and in September, with oil coming from Eagle Ford, Midland, or U.S. Sweet blends, adding that Trafigura “is moving in excess of 10 Aframax-size parcels of USA domestic crude oil to Europe loading across August and September, with the majority in September.”

Stefanos Kazantis, senior shipping and finance adviser at McQuilling Partners in New York, a ship brokerage company noted to Bloomberg that “Shipping U.S. crude to Rotterdam would cost about 80 cents a barrel aboard a Suezmax… Given the overall weakness in the crude tanker markets over the last month, we estimate that the same cargo would have cost charterers anywhere from 20 percent to 30 percent more in July.”

According to the Energy Information Administration (EIA), since the removal of restrictions on exporting U.S. crude oil in December 2015, the number of countries receiving exported U.S. crude has risen sharply.

But what has changed since then is the price differential. U.S. exports of crude continued to rise after the December legislative change despite the fact that the price difference was narrow and cost of transport higher. If the price gap continues to widen and transportation remains cheap, traders are eyeing more increases in exports.

By Lincoln Brown for Oilprice.com

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