According to the CEOs of both Continental Resources (CLR) and Pioneer Resources (PXD), the ban on U.S. oil exports will most likely be lifted in September. And with House Speaker Boehner pledging his support, there is real momentum behind this legislative push.

As Sen. Lisa Murkowski has argued, completing a deal with Iran, which could allow more Iranian crude to be exported, undermines the case for a ban on U.S. exports. Moreover, Russian oil has found its way to refineries in the Northern Eastern United States, according to Pioneer’s CEO. I believe the potential lifting of the ban is the single most important data point on the bull side coming this year, apart from the rig count drop, declining oil inventories, and falling production (contrary to the EIA’s weekly vs. monthly data sets). Related: The Saudi Oil Price War Is Backfiring

To review, as reported months ago, U.S. refineries have been short capacity to process light sweet crude via U.S. shale producers for quite some time, despite adding several hundred thousand barrels of capacity per day recently, with more to come by year’s end.

Thus, the implications of this development on balancing the market are very significant, especially on top of Saudi output cuts in the 200,000 to 300,000 barrel-per-day range at summer’s end. There could also be more OPEC cuts in December as pressure mounts on the failed Saudi market share strategy. I should note that Continental Resources’ CEO believes several rounds of OPEC cuts are coming too. Related: Could North America Pull Off Its Own Oil Cartel?

On the other side is the slight uptick in rig counts, mainly in the Delaware Basin, as well as production gains still being reported by the EIA. Thus, given the level of propaganda that exists in depressing prices via the media it’s unclear what effect, if any, news like lifting the export ban will have on prices. Allowing U.S. exports would at least tighten if not eliminate the Brent premium over WTI at the very least.

Moreover, the Iran agreement is not a done deal, and any faltering on could push up oil prices. Senator Chuck Schumer and Congressman Engle, the top Democrat on the House Foreign Relations committee, have publically come out to oppose the Iran deal, raising the possibility of a vote against in both houses of Congress. Related: Tech Giants Opt For Renewables On Cost, Not Just Good PR

In addition we learned Iranian general Soleimani visited Russia, in violation of UN sanctions banning his travel, even after Secretary of State Kerry reassured Congress the ban would not be lifted. This would put further pressure on Congress to act and undermines trust in Iran’s willingness to hold up its end of the bargain. Furthermore there have been reports of Iran “sanitizing” sites that are on the UN inspection list

Both the oil export ban and the possibility of the Iranian nuclear deal falling through appear very significant but have yet to be recognized by the markets.

By Leonard Brecken of Oilprice.com

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