A relaxation of US crude oil export restrictions could help lower domestic gasoline prices and cut US product exports if US crude oil output continues to surge past 10.6mn b/d over the next ten years, EIA said.
With US gasoline prices tracking Brent crude benchmarks more closely than WTI, scrapping export restrictions would likely drag Brent and US gasoline prices down in tandem if domestic production beats 10.6mn b/d, as US crude producers would respond to opportunities to export surplus material to higher priced Brent-referenced overseas markets. The exports would likely weigh on Brent prices longer term, pulling down domestic gasoline prices in their wake, EIA said. But an end to export restrictions at domestic production of less than 10.6mn b/d would have little overall impact on domestic oil and products prices, EIA said, although crude exports would be expected to grab a larger share of the wider US oil and products export slate.
US crude oil production surged from 5.6mn b/d in 2009 to 8.7mn b/d in 2014, a gain of 55%. In May EIA forecast 2015 production would hit 9.2mn b/d, with a reference case forecast predicting domestic production will plateau near 9.6mn b/d between 2017 and 2020, matching the historical high of 9.6mn b/d seen in 1970.
EIA’s April Annual Energy Outlook however pegged domestic crude production hitting 10.6mn b/d by 2020. The US rig count has increased slightly since bottoming in June despite the collapse in oil prices, although the overall count has still fallen by more than half to just 877 rigs operational in the most recent count.
Wider developments in oil production technology and the macro oil market envirloment will remain the main drivers of oil price direction, EIA cautioned.
MS – 02/09/2015