The BHP Billiton announcement to export processed condensate without approval from the BIS will not substantially change the US light oil imbalance through 1Q 15, but it will add strength to the narrow down of Brent-WTI spread in 2H 15, according to Barclays.Until now, only two companies have received private rulings from the US Department of Commerce’s BIS allowing them to export processed condensate. Since news of the rulings broke in June, several companies, including BHP Billiton, have applied for commodity classifications from the BIS but have not received approval. As a result, processed condensate exports have only trickled through.

On Tuesday afternoon, BHP announced it will export a 650kb cargo of processed condensate without approval from the BIS. This is a significant new development in the crude export saga.

The announcement contributed to the narrowing of the Brent-WTI spread and played a part in shifting the front end of the WTI curve into backwardation after spending a brief period in contango.

"While we think that BHP’s decision will have positive implications for domestic crude prices over the long term, the market’s response to exports at the front of the curve seems unwarranted."

"We don’t think there will be enough exports or new processing capacity to substantially change the domestic light crude oil imbalance in the coming months. For this reason, we maintain our view that Brent-WTI should widen in Q1 15, but
the development strengthens our conviction that the spread will narrow in 2H 15 as processed condensate exports climb and domestic condensate splitter capacity grows," the Baraclyas report added.
Source: Barclays