The decision by the United States last week to lift a 40-year ban on oil exports will not affect the global balance of supply and demand, according to the UAE Energy Minister.
“It is the right of any country to make its own decisions,” said Suhail Al Mazrouei. “We don’t think this will change the supply and demand balance.”
Oil prices hit 11-year lows on Monday following the news that the US would allow exports of oil after over four decades. Brent crude, the international benchmark, fell to about US$36 a barrel.
Mr Al Mazrouei said that it was important to give the market breathing space so that it could adjust itself.
“We hope that the market will stabilise during [next year]. Is it at the end of the year or middle of the year – we have to wait,” he said.
But the resumption of US oil exports remains some way from becoming viable.
“The reality is that at current prices, there will be no exports,” said Amrita Sen, the chief oil analyst at UK-based Energy Aspects.
The company believes that West Texas Intermediate, another oil benchmark, will need to be at least $4 below the price of Brent to justify exports. “It will not be an overnight change and it won’t be economical at current price levels,” Ms Sen said.
Other obstacles remain in order for the US to begin exporting, such as transportation costs of getting the commodity to ports for shipping.
In addition, Ms Sen pointed to how none of the ports in the country have the loading capacity to accommodate the very large crude carriers (VLCCs).
On top of this, the US may face internal challenges. During the past 40 years, the US Gulf Coast’s dock infrastructure has been used to receive rather than deliver.
Energy Aspects said that reversing this process would likely require significant logistical alterations to pipelines, docking practices and storage tanks.
“Many midstream firms have been gearing up for crude and condensate exports from the US Gulf for some time and, given the large decline in US imports over the last few years, dock overcapacity exists today that could probably be repurposed fairly quickly, but not overnight,” the company said in a report.
dalsaadi@thenational.ae
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