Lifting the US crude export ban: no threat

Fitch Ratings has said that a potential lifting of the crude export ban in the US is not likely to be a near term threat for refiners. Despite modifications around the edges of the legislation, Fitch has said that it believes removal of the ban is not likely to become a concern until after the next election cycle, and even then significant political hurdles are likely to stand in the way of its being fully recalled.

Until then, Fitch has said that the status quo is likely to remain intact, continuing the benefits refiners have seen under recent market dynamics. Despite the decline in crude oil differentials, refiners have benefitted from strong crack spreads and low prices which have pushed US gasoline demand higher. Demand in Q2 rose 3.8% /y to date and currently stands at its highest level since 2010.

Crude inventories remain oversupplied, but Fitch has reported that this should correct gradually as industry Capex cuts begin to flow through the system. Higher seasonal refinery utilisation has already had an impact on overall US inventory levels, pushing them down by approximately 6% from peak levels in April of this year. Refinery utilisation will be an issue to watch in the second half of this year as the lower refinery utilisation typically seen heading into the end of the year may lead US crude inventories to build up once more, all else equal.

Edited from press release by Claira Lloyd

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