* U.S. oil companies get answers on what they can export
* White House says policy has not changed
* Analysts divided on how fast U.S. oil glut will ease
(Adds further comment from Commerce Department)
By Timothy Gardner and Valerie Volcovici
WASHINGTON, June 25 U.S. energy markets marked a
seismic shift on Wednesday after federal officials provided
clarity on what companies glutted with domestic shale oil can
ship to thirsty markets abroad, leading to expectations for a
potential surge in petroleum exports.
News that companies can export a type of ultra-light crude
if it has been minimally refined pushed U.S. oil prices
higher, and triggered a realignment in energy stocks, with
refiner shares sagging while those in several oil and gas
The U.S. Department of Commerce's Bureau of Industry and
Security told Pioneer Natural Resources and Enterprise
Product Partners on Tuesday that removing volatile
components from condensate, the light oil, was enough to qualify
the petroleum as a "refined product."
As the United States experiences an oil boom expected to
soon make it the world's largest crude producer, surpassing
Saudi Arabia and Russia -- a prospect that was unimaginable 10
years ago -- companies have sought answers about what kinds of
oil they can export. Under U.S. law, refined products are
allowed to be exported, but most crude oil is not.
Steep U.S. oil prices are unwelcome for the Obama
administration as retail U.S. gasoline prices are already at
six-year highs for this time of year and as global oil prices
are rising on tensions in the Middle East and Russia.
The White House on Wednesday said the Commerce Department's
ruling was not a change in policy.
"As the Commerce Department has said, oil that goes through
a process to become a petroleum product is no longer considered
crude oil," spokesman Josh Earnest told reporters in a daily
The U.S. shale oil boom of the last five years has led
energy companies and politicians to push for a reversal of a
40-year export ban. Drillers say the ban, at a time of sharply
rising production, has led to a glut of domestic oil that could
soon force them to slow output.
The Wall Street Journal on Tuesday first reported that the
Commerce Department, under growing pressure, had given export
approval to the companies via a private ruling.
However, a Commerce Department official told Reuters on
Wednesday that its move was simply a determination defining a
The move is not a change in policy "but a description of
what the regulations are and how they apply to a particular
item," said Kevin Wolf, an assistant secretary of commerce for
export administration. Any company is free to export the
condensate if it is lightly processed, or stabilized, similar to
the way the two companies are doing, he added.
U.S. oil prices, which rose 58 cents to $106.66 per barrel,
highlighted the greater understanding of what had been a
regulatory gray area, and the potential for at least some of the
domestic oil glut to be relieved in coming months.
Regulations prohibit the export of condensate that has been
produced directly from an oil field but allow it if the same
type of oil emerges from a natural gas plant or a refinery.
Energy-hungry Asian countries, which get most of their oil
from the Middle East, would welcome extra U.S. supplies.
It was not immediately clear how much condensate the
companies would be able to ship, and when.
But Enterprise has the infrastructure in place to export
processed condensate from its massive Houston storage facility,
spokesman Rick Rainey said, and can start exporting the very
light crude oil any time.
The condensate in question has long been run through
equipment known as stabilizers, which shave off volatile natural
gas liquids, in order to meet pipeline specifications.
Stabilizers are common in the Eagle Ford shale region of Texas.
A lawyer who works for the oil refining industry downplayed
the significance of the clarification on exports.
"The decision to allow condensate exports frankly is not
that big of a deal," said the lawyer who did not want to be
identified because his firm represents a variety of oil industry
"It doesn't look like many other companies will be able to
use these decisions to their advantage," because a distillation
unit requires substantial capital investment, permitting, and
specific crudes, he said.
Citigroup oil analyst Ed Morse, however, deemed the move as
more of a game changer. "The flood gates of exports will be
opened now," he said, adding that some 200,000 to 300,000 bpd of
condensate could be exported by the end of the year and that the
volume could double in 2015.
Shares in Pioneer jumped 5.15 percent on Wednesday, those in
Enterprise advanced by 1.35 percent and shares in several other
U.S. oil and gas producers, especially those more weighted to
condensate, also rose.
But shares of U.S. refiners, especially those most levered
to light crude oil, dropped on fears of a rise in crude costs.
Valero Energy Corp slumped 8.3 percent, and Alon USA
Energy shed 6 percent.
(Additional reporting by Roberta Rampton and Jeff Mason in
Washington, Joshua Schneyer in New York, Kristen Hays in Houston
and Swetha Gopinath in Bangalore; Editing by Ros Krasny, Ken
Wills and Joseph Radford)