|01-04-2015, 12:59 PM||#1|
Oil markets shaken by U.S. export clarification, supply glut sends prices lower
Crude oil prices hit fresh post-crisis lows on Friday on increased signals of a supply glut and after the U.S. government shed light on regulations that paved the way for more oil exports.
Oil prices faced some pressure after surveys showing slow manufacturing activity in China and Europe in December, reiterating the weak growth that had been slowing the oil demand over last year.
Output from Iraq, the second-largest producer of the Organization of the Petroleum Exporting Countries (OPEC), jumped in December to its highest level since 1980 at an average of 2.94 million barrels per day. Russia meanwhile reported a post-Soviet high output in 2014.
Also, a senior Libyan official said that the major fire in the country’ largest oil export port had been extinguished.
Oil markets were a bit unnerved by an announcement by the U.S. Commerce Department that clarified rules on exports a lighter for of crude oil known as condensate which allows it to be sold outside the U.S. without the approval of the government.
The guidelines were published at the end of last week on the website of the Bureau of Industry and Security, and explained to companies the steps that can be taken to avoid violation of export laws. The publication might lead to higher exports of U.S.-produced oil.
The announcement did not end the ban on most exports of crude oil. However, it was adopted by Congress in 1975.
“Lease condensate that has been processed through a crude oil distillation tower is not crude oil, but a petroleum product. Petroleum products are subject to few export restrictions,” said the bureau in a detailed FAQ posted on its website on Tuesday.
A note by Citigroup Inc. said this could substantially increase U.S. exports, adding that total exports of light and ultra-light crude oil could hit 1 million bpd by the end of 2015.
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