Just as we warned, since the US export ban 'lift' loomed [5], so WTI prices have shifted notably, having today converged to Brent's price for first time since January. It may have a lot further to fall as some analysts suggest the lifting of the export ban "is going to end up ultimately being bearish everything."
Last week we said...
Brent-WTI set to converge as US begins exporting oil
— zerohedge (@zerohedge) December 16, 2015 [6]
And 5 days later...
[7]
Brent-WTI has converged...
[8]
As for the impact on global markets, OPEC’s Secretary-General Abdalla El-Badri said Tuesday that "any change in U.S. oil policy will have 'zero' impact on global mkts because the country remains an importer."
In the grand scheme of things, you're really just shifting inventory around, Virendra Chauhan at Energy Aspects in Singapore says: “The deal to lift the crude ban is a significant change in U.S. policy, but in terms of the near-term impact on prices, we expect that to be blotchy and sentiment driven. All that you’re doing is transferring the glut from the U.S., where most of the storage capacity is, to elsewhere in the world.”
"Large volumes of crude are unlikely to flow out of the US as soon as the restrictions are lifted," FT writes [9]. "The spread between the price of West Texas Intermediate crude, for delivery in Oklahoma, and internationally traded Brent is only about $1.25 per barrel, meaning that any benefit for US producers from selling in world markets would be swallowed up in transport costs."
"WTI would have to be at least $4 below Brent for exports to work, depending on the cost of shipping," Bloomberg wrote [10] earlier this week, citing Energy Aspects analysts. That means spreads would have to widen to make exports economical. "This is going to end up ultimately being bearish everything," Citi's Seth Kleinman says. "You’re losing on the Brent side, and it’s not clear to me what you’re gaining on the WTI side. In oversupplied market, opening up the export arb changes not exactly nothing, but not far off from nothing."
In any case, “it’s definitely a negative for Brent," Kleinman concludes, "as U.S. crude enters [and already] oversupplied global market."
