Texas Can't Keep All the U.S. Petroleum Exports to Itself

(Bloomberg) -- It would appear that the net-importing U.S. East Coast has a little bit of Texas export envy.

U.S. exports of middle distillates like ultra-low sulfur diesel surged to a record 1.72 million barrels a day last week -- thanks in part to BP Plc’s rare exports from the U.S. Atlantic Coast. At the same, crude exports that primarily flow from Texas’ Gulf Coast rose to a new high of 2.33 million. One comment from the oil trading edits desk says it all: “Are the exports real?”

Now total petroleum exports are more than double what they were before the U.S. lifted its ban on crude exports at the end of 2014. As West Texas crude’s discount to European grades falls to a three-year low, the incentive to export crude is only growing.

Last week’s strange diesel exports are more likely an anomaly than a trend: As the U.S. continues to ramp up output of light, sweet, Texas oil, refiners’ ability to pump out diesel will be threatened, and the U.S. will soon face a shortfall, Fitch’s BMI Research analysts said Wednesday in a note.

“Large scale U.S. crude export routes are limited for the time being,” the analysts said. “If this leads to a larger discount in tight oil grades, further incentivizing domestic processing, the U.S. may be set up poorly for strengthening distillate demand later in the year.”

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