According to the Energy Department, US commercial oil reserves grew in the first week of 2016 by 280,000 barrels, to 482.6 million. Meanwhile, analysts predicted an increase by two million barrels, according to Bloomberg. What is more, in the previous week, the reserves decreased by 5.1 million barrels.
To some extent, reserves volatility stems from the fact that Washington lifted its 40-year oil export ban. In mid-December, President Barack Obama signed a spending bill which included overseas oil supplies.
In March 2014, before the first sanctions were imposed against Russia over Ukraine and Crimea, some American politicians proposed using oil and gas to support US allies in Europe. On March 4, 2014, John Boehner, then-speaker of the House of Representatives, said the US should start selling its energy resources to Europe.
"We should not force our allies to remain dependent on [Russian president Vladimir] Putin for their energy needs," Boehner was quoted as saying by Financial Times. "Ending this de facto [export] ban and expediting approval of natural gas exports is one clear step the US can take to stand by our allies and stand up to Russian aggression, while creating American jobs at the same time."
However, even now, with the first US oil tankers on their way to Europe, the president still has the right to veto the decision for one year, in the event of a state of emergency in the country or oil shortage threatening national security.
Falling gas prices in Asia as well as the ongoing decrease in global oil prices made oil and gas deliveries from the US much less profitable.
As for natural gas, it sells on the basis on long-term contracts, and its supplies will continue in accordance with previously agreed deals. For European customers, exports of liquefied natural gas (LNG) would diversify the energy sources and increase their reliability.
In late-December, it was reported that Enterprise Products from Texas signed contracts to deliver 600,000 barrels of crude to oil refineries in Switzerland. On January 1, the first tanker set sail for Italy from where the oil will be transported by pipeline to German refineries. On Wednesday, The Wall Street Journal reported that a second cargo of US oil was sailing to France. From there it will also move by pipeline to a Swiss refinery.
In the long-term perspective, Latin America and Europe would become the key markets for US crude, according to WSJ.
For now, exports of US oil are nothing but an effort to "re-balance" its domestic market, Uralsib analyst Alexei Kokin told Gazeta.Ru.
"As long as the US is a net exporter of crude there will be no large-scale overseas supplies," he said. According to his estimates, the US would export as many as 100,000 barrels a day from its daily output of 9.2 million.
Currently, the US wants to empty its storage facilities in a number of regions, and then they will be refilled with crude from Venezuela, Canada and Nigeria, he added.
"US refineries are so technically advanced that it is more profitable for them to refine heavy oil crude grades," Kokin explained.
Analyst Vyacheslav Mischenko said the US now refines 17.5 million barrels of crude daily while its daily output is some 9 million barrels.
"Daily deficit is around eight barrels. There are heavy oil grades the US has to import," he pointed out.
Thus, exporting oil, on the one hand the US is lessening the load in its storages, and on the other hand is making profit on the price gap.
However, the US is likely to increase its exports in the future, Ryan Lance, chief executive of ConocoPhillips, told WSJ. He predicted that foreign buyers may come to rely on the US exports as much as two million barrels of oil every day within the next five years.
As usual, the question is all about the price. Alexander Pasechnik, senior analyst at Russia’s Foundation for National Energy Security, underscored that deals are made on the basis of exchange prices, plus-minus $1-1.5.
"Logistics costs are usually included in the exchange price. Despite the fact that transporting by sea is cheap (cost of transporting one barrel of oil from the US to Europe is $5) finally it also affects the profit margin," he said.
According to the analyst, only a few US oil producers can make profit on supplies to Europe.
The average cost of oil production in the US is nearly $35. "There are companies with an average production cost of $20 or even $15 a barrel. But there are only few of them. Most companies are operating at losses or even suspending production," Pasechnik said.
According to him, the US is unlikely to flood the European market with oil and thus deal a blow to European traditional suppliers, including Russia.
