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U.S. crude oil exports hit an all-time high at the end of September, and are poised to surge even more to hit unprecedented levels in the coming two or three weeks, Marco Dunand, chief executive of trading house Mercuria, told the Reuters Global Commodities Summit on Friday.
U.S. crude oil exports hit a record-high of 1.98 million bpd in the week to September 29, EIA data showed. This was the highest weekly average since the U.S. removed restrictions on crude oil exports at the end of 2015, after a four-decade ban. Oversupply due to Harvey drove the higher exports, but most of all, it is the wide spread of around $6 between WTI and Brent prices that drives buyers to lust after the cheaper U.S. crude grade. The spread is also wide enough to offset shipping costs to destinations like Asia and Europe.
Mercuria’s Dunand thinks that the excess U.S. crude oil stocks will trigger more record highs over the next month, and American oil exports could reach 2.2 million bpd.
“Looking at the vessel fixtures of recent times, I think we’re going to see record exports over the next month,” Dunand told the Reuters summit.
“I think the volume that’s going to be exported from the U.S. in the next two or three weeks is unprecedented in size,” the manager noted.
According to Dunand, while product stocks in the U.S. are more or less in line, America’s crude inventories are in excess.
“The rest of the world, crude stocks are more or less in line. The excess of crude stocks to rebalance the market naturally has to find its way,” he said, adding that Europe and Asia would buy that excess U.S. barrels.
Apart from the wide Brent-WTI spread, the futures curve structures are also indicative of future oil flows. Brent flipped into backwardation recently, much to the joy of OPEC, while WTI is still in a contango.
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“If you have backwardation in Dubai, backwardation in [Brent] and a contango in WTI, it’s telling you that some of the WTI excess has to move to other places,” Dunand said.
The manager, however, doesn’t see oil prices under much pressure due to the record U.S. exports, because the market is ready to absorb the oil, which for many buyers is the cheapest now.
“The refiner will go and buy the cheapest possible barrels,” Dunand said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.