Widening spread incentivizes marketers to export abroad: Fed

U.S. crude oil exports went from 1.29 MMBOPD in Sept. to 1.78 MMBOPD in Oct., an all-time high according to the Federal Reserve Bank of Dallas.

The crude oil export ban was lifted in Dec. 2015 and infrastructure was built or modified to help exports. One major construction project was the Ingleside Energy Center Terminal in Corpus Christi, Texas. The Reserve said that the widening of the WTI-Brent spread is incentivizing marketers to ship domestic crude internationally to obtain higher prices.

What about U.S. crude imports? Imports from Iraq outnumbered Saudi – first time in 3 decades

Imports from Saudi Arabia decreased from 678,000 b/d in Sept. to 506,000 b/d in Oct. However, crude imports from Iraq increased from 363,000 b/d in Sept. to 763,000 b/d in October. This marks the first time since Sept. 1985 that Iraqi crude oil imports outnumbered Saudi imports. The Fed speculates that this is a likely result of Saudi Arabia’s strong compliance with OPEC production cuts.

OECD inventories

U.S. commercial inventories decreased in Oct. by 34 million barrels to 1,261 million, remaining 188 million barrels above 2010-2014 average inventory levels. On the other hand, OECD commercial crude oil inventories (excluding the U.S.) rose by 15 million barrels to 1,705 million, 119 million barrels above the 2014-2014 average levels.

The Fed said, “While over half of the inventory overhang in OECD markets is concentrated in the United States, the 88-million-barrel decline in U.S. inventories since May is a promising sign that domestic inventories are rebalancing.”

Eleventh District oil production

The Permian Basin’s production in Oct. rose by 60,800 b/d to 2.57 million. Eagle Ford production went up by 8,600 b/d to 1.22 million. Permian production has been increasing for 13 consecutive months. However, Eagle Ford’s production has remained flat, increasing only 40,600 b/d over the past 12 months. The report said that operating rigs numbered 379 in the Permian Basin and 65 in the Eagle Ford at the end of Oct.

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