Move to Allow U.S. Crude Exports Could Shift Tanker Market Dynamics

VLCCs could benefit it the U.S. began exporting crude oil

The U.S. government may be moving toward lifting its ban on the export of crude oil, which could change the dynamics of the tanker market, industry news site ShippingWatch reports.

A senior advisor to President Barack Obama recently said the administration is "actively looking into challenges related to the shale oil boom," according to the Financial Times, and other sources told the newspaper that the government seems to be leaning toward allowing crude exports.

"If the US becomes able to export crude oil, the crucial thing from a shipping perspective is who the buyer will be," said Christopher Rex, chief economist at the Danish Shipowners' Association.

"The crisis in Crimea has changed the geopolitical scenario, so that Europe and the US will have to think more about their supply security than they have in the past.

"Another crucial factor will be whether this crude is shipped to the new, more modern refineries in Asia, and then back to Europe on product tankers, as that would be a best-case scenario for the shipping industry."

Very large crude carriers (VLCCs) could benefit most from a change in U.S. policy, but Rex said the product tank market might not lose out since it could end up transporting products from Asia to Europe.

However, Peter Sand, chief analyst for the Baltic and International Maritime Council (BIMCO) said he does not anticipate significant crude exports from the U.S. even if the ban is lifted.

"The way I see it, crude oil from the US is more of a theoretical idea," he said.

"It will not make sense financially to ship crude oil out of the country, so I mainly envision an export of refined products from the United States, and that's already happening.

"The US has plenty of capacity in its refineries across the country, around 189 million barrels per day, but the core of the matter is the quality of locally produced crude versus imported crude, and the country itself uses 14-15 million barrels per day."

A report released by the International Energy Agency (IEA) in October predicted that the U.S. would be the world's second-biggest oil producer in 2014.