* U.S. oil companies
get answers on what they can export
* White House says policy has not
changed
* Analysts divided on how fast U.S.
oil glut will ease (Adds further comment from Commerce Department)
WASHINGTON, June 25 (Reuters) - U.S.
energy markets marked a seismic shift on Wednesday after federal officials
provided clarity on what companies glutted with domestic shale oil can ship to
thirsty markets abroad, leading to expectations for a potential surge in
petroleum exports.
News that companies can export a
type of ultra-light crude if it has been minimally refined pushed U.S. oil
prices higher, and triggered a realignment in energy stocks, with refiner
shares sagging while those in several oil and gas producers jumped.
The U.S. Department of Commerce's
Bureau of Industry and Security told Pioneer Natural Resources and Enterprise Product Partners on Tuesday that
removing volatile components from condensate, the light oil, was enough to
qualify the petroleum as a "refined product."
As the United States experiences an
oil boom expected to soon make it the world's largest crude producer,
surpassing Saudi Arabia and Russia -- a prospect that was unimaginable
10 years ago -- companies have sought answers about what kinds of oil they can export.
Under U.S. law, refined products are allowed to be exported, but most crude oil
is not.
Steep U.S. oil prices are unwelcome
for the Obama administration as retail U.S. gasoline prices are already at
six-year highs for this time of year and as global oil prices are rising on
tensions in the Middle East and Russia.
The White House on Wednesday said
the Commerce Department's ruling was not a change in policy.
"As the Commerce Department has
said, oil that goes through a process to become a petroleum product is no
longer considered crude oil," spokesman Josh Earnest told reporters in a
daily briefing.
The U.S. shale oil boom of the last
five years has led energy companies and politicians to push for a reversal of a
40-year export ban. Drillers say the ban, at a time of sharply rising
production, has led to a glut of domestic oil that could soon force them to
slow output.
The Wall Street Journal on Tuesday
first reported that the Commerce Department, under growing pressure, had given
export approval to the companies via a private ruling.
However, a Commerce Department
official told Reuters on Wednesday that its move was simply a determination
defining a commodity class.
The move is not a change in policy
"but a description of what the regulations are and how they apply to a
particular item," said Kevin Wolf, an assistant secretary of commerce for
export administration. Any company is free to export the condensate if it is
lightly processed, or stabilized, similar to the way the two companies are
doing, he added.
U.S. oil prices, which rose 58 cents
to $106.66 per barrel, highlighted the greater understanding of what had been a
regulatory gray area, and the potential for at least some of the domestic oil
glut to be relieved in coming months.
Regulations prohibit the export of
condensate that has been produced directly from an oil field but allow it if
the same type of oil emerges from a natural gas plant or a refinery.
ASIAN BUYERS
Energy-hungry Asian countries, which
get most of their oil from the Middle East, would welcome extra U.S. supplies.
It was not immediately clear how
much condensate the companies would be able to ship, and when.
But Enterprise has the
infrastructure in place to export processed condensate from its massive Houston
storage facility, spokesman Rick Rainey said, and can start exporting the very light crude oil any time.
The condensate in question has long
been run through equipment known as stabilizers, which shave off volatile natural gas liquids, in order to meet pipeline
specifications. Stabilizers are common in the Eagle Ford shale region of Texas.
A lawyer who works for the oil
refining industry downplayed the significance of the clarification on exports.
"The decision to allow
condensate exports frankly is not that big of a deal," said the lawyer who
did not want to be identified because his firm represents a variety of oil
industry interests.
"It doesn't look like many
other companies will be able to use these decisions to their advantage,"
because a distillation unit requires substantial capital investment,
permitting, and specific crudes, he said.
Citigroup oil analyst Ed Morse,
however, deemed the move as more of a game changer. "The flood gates of
exports will be opened now," he said, adding that some 200,000 to 300,000
bpd of condensate could be exported by the end of the year and that the volume
could double in 2015.
Shares in Pioneer jumped 5.15
percent on Wednesday, those in Enterprise advanced by 1.35 percent and shares
in several other U.S. oil and gas producers, especially those more weighted to
condensate, also rose.
But shares of U.S. refiners,
especially those most levered to light crude oil, dropped on fears of a rise in crude costs. Valero Energy Corp slumped 8.3 percent, and Alon USA Energy shed 6
percent. (Additional reporting by Roberta Rampton and Jeff Mason in Washington,Joshua Schneyer in New York, Kristen Hays in Houston and Swetha
Gopinath in Bangalore; Editing by Ros Krasny,
Ken Wills and Joseph Radford)
Culled from http://www.reuters.com/
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