By Sarfaraz A. Khan. Research Asst. Iffat Zehra
Since 1970s, the U.S. oil companies have been mostly prohibited from exporting locally produced crude oil. The ban was aimed at safeguarding the U.S.'s national interest as a reaction to the Arab oil embargo in that period which undermined crude supplies in the U.S., given the embargo came at a time when U.S. was already struggling with deteriorating oil production.
However, in the last few years, the U.S has witnessed a boom in shale oil production on the back of horizontal drilling and hydraulic fracturing techniques. Following years of annual declines in the U.S. field crude oil production from 8.97 million barrels a day in 1985 to 5 million barrels a day by 2008, the output gradually climbed to 7.4 million barrels a day by 2013, as per data from EIA. This also led to an increase in the condensate output, a refined form of ultra-light crude oil which represents around 8% of the total U.S. production.
With growing production from the U.S. as well as other nations and soft oil demand from key consumers, the crude oil markets have moved into surplus. To exacerbate, output from Russia in 2014 has touched post-Soviet era highs while exports from Iraq have increased to their highest levels in over three decades. The growing concerns related to increasing supplies led to another drop in WTI prices on Tuesday to less than $50 a barrel.