Tuesday evening, the Wall Street Journal reported the White House had loosened rules on the four-decade-old crude export ban that had imposed in the wake of the first Arab oil crisis.
The news caused New York-traded West Texas Intermediate oil contracts to spike more than 1% instantly on the expectation for new demand.
But in the past 24 hours, analysts, as well as the government itself, have chimed in to clarify that the crude export ban has not really been touched.
Energy firms are permitted to export refined oil products, just not raw, unrefined crude.
The Commerce Department confirmed that it approved applications from two energy firms to export a form of ultra-light oil known as condensate, of which there is now a huge glut thanks to the U.S. shale boom.
But the applications were only approved because the condensate will be lightly processed through a distillation tower.
“In other words, this permit is effectively a refined product under U.S. law — unrefined condensate is not allowed,” Morgan Stanley’s Adam Longson wrote in a note this morning, adding that the Commerce Department’s ruling was a “false alarm” on the ban, and “unique.”
In a statement Tuesday night, the Commerce Department itself said there has been “no change in policy on crude oil exports.”
Clearview Energy’s Kevin Book told us the rulings are basically in line with what markets had been expecting in the wake of John Podesta’s comments that US crude exports are “a topic that’s under consideration.” Still, the condensate rulings are not without significance for prices.
“There’s no reason why markets shouldn’t find this bullish, but the status quo expectation the market may have had from Podesta et al. was WH consideration of a condensate rulemaking (which would itself just be a subset of crude available for export),” he said. “Two companies exporting condensate is a subset of a subset.”
Longson agrees that any movement on exports “suggests positive movement” on the exports issue, but that several questions remain about what exactly Commerce has done here — what other kinds of rulings can be expected for similar products.
WTI futures were up 0.4% Wednesday afternoon.
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