OREANDA-NEWS. September 15, 2015.  House Energy and Commerce subcommittee passed HR 702, which would repeal all limits on US crude exports. The US Energy Information Administration claims that a crude export policy shift would likely have a relatively minimal impact on overall export levels, causing, at most, 1.5 million b/d of crude exports over current levels, but only in the most extreme case the agency looked at.

Still, the policy has ignited a fierce lobbying battle between producers, who claim they need access to the world market to compete in the current low-price environment, and some refiners, who claim a policy change will hinder the domestic refining industry.

What to watch for

The bill still needs approval from the full House Energy and Commerce Committee and, if passed, from the full House. It remains unclear if the Senate will vote on its own bill to lift export limits.

In July, the Senate Energy and Natural Resources Committee passed its own bill, by a party-line vote, but it may not receive a Senate vote in the near term due to limited floor time, according to congressional sources.

The Obama administration has indicated it has no plans to lift crude export restrictions, leaving the work to Congress.

US crude production outlook

The bill comes amid a slowdown in US production and expectations that domestic supply may have peaked due to low prices and stagnant demand.

This week, EIA again revised its forecast for US crude oil production downward, due to low prices and billions in capital expenditure cuts.

US crude oil production will average 9.22 million b/d in 2015, EIA said this week, down 25,000 b/d from expectations in July. US crude production is expected to fall to 8.82 million b/d in 2016, EIA said this week.

Earlier this year, EIA forecast crude production to hit 9.53 million b/d in 2016.

US crude storage levels

The debate over exports also comes as global supply is increasingly outpacing demand and crude oil stocks continue to grow.

The EIA reported this week that US crude oil stocks climbed 2.6 million barrels to 458 million barrels as of September 4. Including the US Strategic Petroleum Reserve, the US has over 1.15 billion barrels of crude in storage.

US crude imports/exports

While efforts are underway to lift all limits on US crude exports, there are exceptions, including certain exports to Canada and exports from Alaska.

During the last week of August, the US exported 477,000 b/d of crude, down from the 576,000 b/d exported two weeks earlier, according to the EIA. Exports of US crude have risen sharply since June 2014 when 74,000 b/d were exported.

One of the key arguments against allowing US crude exports has been the fact that the US is still importing millions of barrels of crude. According to the EIA, the US imported nearly 7.86 million b/d of crude in the last week of August.

While US crude imports have fallen from its peak of 11.15 million b/d in July 2010 import levels have never fallen below 7.14 million b/d, according to the EIA.

US exports and prices

Even if all export limits are lifted the volume of crude to be shipped out of the US will likely be constrained by the narrow Brent-WTI spread which broke below \\$3/b in trading Thursday.

The EIA believes that in most cases a change in US crude export policy will have a minimal effect on WTI and Brent prices, but in an extreme, high-production case, the Brent-WTI spread could climb as high as \\$15/b by 2025 if US limits remain in place.

If the limits are removed the spread would climb to only \\$8.21/b over the next decade under that extreme case, according to the EIA.