Hellenic Shipping News: Aframax Tanker Owners Will Probably Be The First Ones To Benefit From The Lifting Of US Oil Exports Ban

28 Dec 2015: “U.S. crude oil exports will change the oil and tanker market said Poten & Partners in its latest weekly report. According to Poten, the potential for U.S. crude exports is a big deal and within a few days many articles and opinion pieces have come out to explain what this means for oil prices, refining margins, the WTI/Brent spread and many other factors. “In its report, Poten raised the question of who will be the most likely importers of U.S. crude, when or even if, the spreads support exports at some point in the future? According to Poten, ‘that will depend on a number of factors. First of all: export infrastructure. In the short-term, only ports in the U.S. Gulf area have the capability to load crude oil on vessels for export. Most facilities in the Gulf only support Aframax tankers but some (like Corpus Christi) will be able to handle Suezmaxes in the future. VLCCs may be utilized in the short term if the economics support reverse lightering in the U.S. Gulf. Louisiana Offshore Oil Port (LOOP) is the only VLCC facility in the U.S. Gulf, but it is an import terminal. LOOP is thinking about starting loading services by 2018 and adding storage capacity, but reconfiguring LOOP will take time and money’, Poten noted. “According to the analysts, if one considers the restrictions mentioned above, it’s fair to say that the initial crude oil exports from the U.S. will probably take place on Aframax vessels, ‘targeting short-haul markets in Europe and Latin America. Another driver will be the quality and relative pricing of the different grades (ANS, Mars, LLS, Eagle Ford, Bakken, etc.) that could be available for export. Exports of light tight oil from Eagle Ford or the Permian Basin will likely end up in Europe as it is the right quality for European refiners and the short distance makes it competitive to move on medium sized crude tankers. People expect some U.S. crude oil to eventually end up in the Far East as well because Asian refiners may be willing to pay a premium for the light tight oil (which has a high naphtha content)’, said Poten. “Finally, another important question for tanker owners, is which tanker segments will likely benefit from U.S. crude exports and which ones will not? According to Poten, ‘once exports start flowing, Aframax crude tankers will be the initial beneficiaries. If production continues to increase and pricing is favorable, Suezmaxes and VLCCs may come into the mix (which would open up Asian markets). The impact on product carriers will depend very much on the relative competitiveness of the U.S. Gulf refiners. While the feedstock pricing advantage will likely diminish, refiners still have access to cheap gas and remain close to key markets in Europe and Latin America. The lifting of the U.S. crude oil export ban will probably be a net negative for the U.S. Jones Act market. This market did receive a boost from the coastwise transportation of crude oil in the past, but these movements, which already declined significantly in 2015, may disappear altogether’, Poten concluded.”