Congress is set to lift the 40 year old crude export ban. What kind of impact will this have on the Bakken? Here are a few things that you need to know:
Short term market reaction to be tepid
There is currently a huge glut of domestic and international oil. Producers in the Bakken are going to have a very difficult time finding a market for their oil in the short-medium term.
Longer term the quality of the crude that comes from the Bakken could help producers find new market opportunities. However, the near term prospects for the Bakken appear murky at best. New crude supplies from Iran set to hit the market in the next year, adding to an already heavy glut of oil.
Spread between Brent crude (European) and West Texas crude has evaporated
As recently as February, Brent crude was selling at over a $13/barrel premium to West Texas crude, that spread is now virtually gone. This means that even if there was international market for Bakken or West Texas crude, it would be cost prohibitive to send it there until the spread widens again.
Longer term questions have been brought up about the viability of some of the oil fields in the Brent Sea. The play is very mature and new exploration programs will be difficult to justify at current oil prices. If the long term supply of Brent crude is disrupted it could be an opportunity for Bakken producers to fill the void.
Planned pipeline and rail projects could get a boost
Pipeline and rail projects that are planned for the coasts (Gulf, East, West) could get a shot in the arm. Countries that produce very heavy oil such as Venezuela and Mexico could be long term buyers of the high quality Bakken crude which they can mix with their product to make it more appealing. Asian markets also represent possible longer term buyers of Bakken crude. Unfortunately, the current abundance of international crude oil is more than adequate to handle Asian demand in the short-medium term.
Those who are anticipating a boost in oil activity in the Bakken region because of the ban being lifted are likely going to be disappointed, at least for a while.
There is an outside chance that some planned infrastructure plays in the region could be given more priority in anticipation of future exports. This could help provide a short-medium term boost to jobs and local businesses in the region.
Even though the short-medium term benefits may be muted, the export ban needs to get repealed. We live in a global economy, saddling domestic oil companies with economic sanctions puts them at a disadvantage against international companies.
Bottom line, the long term potential benefits of lifting the export ban far outweigh the potential negatives.
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