This, if acceded to, will likely spell doom for Nigeria’s crude oil export, as the country will struggle to find buyers for its crude oil, especially in Europe, North and South America.
Nigeria is already experiencing difficulties in selling its crude oil and had to cut the price of the commodity to make it attractive to buyers.
The call for the lifting on the ban for US crude export came on the heels of plans by Delta Airline’s refining unit, Monroe Energy, to buy as much as five million barrels of discounted Nigerian crude between now and mid-August for its refinery in Trainer, Pennsylvania.
The purchases by Monroe Energy, according to data obtained from Reuters, marked a shift for the refinery, which largely had stopped importing Nigerian oil two years ago and had been using largely North American supplies earlier this year.
Delta’s Monroe Energy and other Northeast refiners that rely on waterborne shipments of crude have argued that if the oil export ban is lifted, it could put them at a disadvantage to competitors in Europe, possibly allowing their foreign counterparts to buy U.S. crude more cheaply than they can.
The difference, they say, is federal Jones Act requirements forcing them to use American-made and U.S.-flagged ships anytime they transport cargo among U.S. ports.
Again, the crude oil producers, under the aegis of Producers for American Crude Oil Exports, disclosed that while domestic refiners are free to buy crude from most any foreign supplier and shop around for the best price, U.S. oil producers do not have the same luxury,
“When we do not have a buyer, the price comes down, crude goes to storage, or we stop producing,” George Baker, Executive Director of Producers for American Crude Oil Exports, stated.
The producers stated that foreign oil from Nigeria and other countries may become more attractive to some U.S. refineries as the price difference between domestic West Texas Intermediate and international crude benchmark Brent dwindles.
According to the producers, although the WTI-Brent differential has been in the double digits in recent years, it had closed to about $4 per barrel in futures trading of August contracts during Monday trading.
The US law blocks most unprocessed crude from being sold overseas, but does not affect oil imports and does not limit trade in refined petroleum products, such as gasoline, diesel and jet fuel, which can be freely sold to foreign buyers.
There also are exceptions to the oil export ban for some Californian crude, oil extracted on Alaska’s North Slope and shipments to Canada.
The US oil producers argued that the existing trade restrictions unfairly keep them from accessing world markets, artificially suppressing domestic prices for their crude.
The Delta case study is likely to get some publicity this week, when separate House committees hold hearings on crude exports.
Source vanguard
No comments
Post a Comment