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Sept. 30 (Bloomberg) -- U.S. oil exports, which in July reached the highest level since 1957, are set to climb to a record by the end of 2014 as producers find ways around a four- decade restriction on crude leaving the country.
The U.S. sent 401,000 barrels a day abroad in July, 54,000 shy of the record set in March 1957, according to data compiled by the Energy Information Administration, the Energy Department’s statistical unit. While Canada accounted for 93 percent of the shipments, Italy, Singapore and Switzerland also took U.S. oil. Coupled with Alaskan oil bound for Asia, total U.S. exports will reach 1 million barrels a day by the middle of 2015, according to Citigroup Inc.
Shipments abroad have quadrupled from a year ago as U.S. drillers pull record volumes of crude and natural gas out of shale formations across the middle of the country using hydraulic fracturing and horizontal drilling. Exemptions to a federal ban on crude exports allow for deliveries to Canada and permits some shipments from Alaska and California. The Commerce Department also issued rulings this year allowing an ultra-light crude known as condensate to be sent overseas.
“You have the condensates, some Alaska North Slope oil and the exports to Canada,” Amrita Sen, chief oil analyst for the London-based research company Energy Aspects Ltd., said by telephone today. “We can have record-high numbers by the end of the year.”
ConocoPhillips said yesterday that it’s shipping a cargo of Alaska North Slope oil, or ANS, to Asia in the fourth quarter. The Polar Discovery, a 140,000-deadweight ton oil tanker, left the oil port of Valdez in Alaska on Sept. 26 for Yeosu, South Korea, vessel-tracking data compiled by Bloomberg show.
“The Conoco cargo headed for South Korea marks the first sailing in what Citi expects to become an armada,” Ed Morse, the head of commodities research at Citigroup, said in a research note today. “Exports of ANS should reach sustainable levels of 100,000 barrels a day or more as more producers follow suit.”
U.S. shipments to Canada will also rise when maintenance there ends, even as Enbridge Inc. finishes the reversal of Line 9B that will carry 300,000 barrels of oil a day to eastern Canada from Ontario, Sen said.
“We are expecting U.S. exports to remain high even with the Line 9 reversal,” Sen said. “Eastern Canadian refiners want the light, sweet crude, and the U.S. can give it to them.”
Suncor Energy Inc. is performing work at its Sarnia, Edmonton and Montreal refineries in Canada this month. Irving Oil Ltd.’s 298,800-barrel-a-day Saint John refinery in New Brunswick also has units shut for repairs, according to the Louisville, Kentucky-based energy data provider Genscape Inc.
North Atlantic Refining Ltd.’s 115,000-barrel-a-day Come by Chance refinery was scheduled to finish planned repairs next month, two people familiar with the work said Aug. 21, while asking not to be identified because the information isn’t public.
The slide in oil prices linked to the international benchmark North Sea Brent crude may slow demand for U.S. barrels. Brent-related crudes have become more attractive to refiners along the Atlantic Coast, Geneva-based JBC Energy said in a research note Sept. 22. U.S. benchmark West Texas Intermediate closed at a $2.63-a-barrel discount versus Brent yesterday, the narrowest since August 2013.
“I don’t think anybody is talking about Brent displacing U.S. oil up in Canada right now, but if we stay down here or get back to par, you might make the case for that,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said by telephone today. “It takes a little more than a week at that spread to really think of the attractiveness.”
Two crude cargoes were booked on tankers from the U.S. Gulf Coast to Canada in the past week, compared with one for the previous three weeks combined, according to ship fixture data compiled by Bloomberg.
“If we aren’t already there, we’ll probably be at record exports by the end of the year,” Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, said by telephone today. “We’re finding ways to ship it out and the numbers keep growing. It’s an inevitable thing.”
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