U.S. widens battle for global oil market: allows condensate exports
Despite a four-decade-long ban on oil exports, the Obama Administration has opened the door for local producers to reach global markets by officially allowing the shipment of as much as a million barrels per day of ultra-light crude, also known as condensate.
According to directives published by the Bureau of Industry and Security, companies can now sell condensate that has been processed through a basic distillation tower, which separates the hydrocarbons that make up the oil.
The move is expected to expand the country’s export capacity from the current 200,000 barrels a day, to about 500,000 a day by the middle of 2015, according to Citigroup.
The decision does not end a ban on most crude exports, adopted by the U.S. Congress in 1975 in response to the Arab oil embargo. However, it is seen as a powerful shot at the Organization of Petroleum Exporting Countries (Opec) in the quest to control global oil markets.
The ending of the U.S.'s self-imposed embargo on oil exports would mark a serious escalation in the unfolding oil price war with Opec led by Saudi Arabia. The kingdom has made it clear that it is willing to watch the price of oil fall lower in order to protect its share of the global market.
Opec share has dropped to roughly a third of world supply, down from about half 20 years ago as the flood in shale oil drilling in the U.S. and new supplies from Russia and South America have created a global glut.
Earlier this year, producers such as Pioneer Natural Resources (NYSE:PXD) and Enterprise Products Partners (NYSE:EPD) managed to get authorization to export oil. And last month BHP Billiton (NYSE:BHP) became the first firm to announce it would export condensate without formal approval from the government.