Congress Closer To Allowing U.S. Oil Exports

Congress moved a step closer Thursday to lifting the 40-year-old crude oil export ban, and shale producers' shares rose as demand for gasoline climbed.

The House Energy and Power subcommittee passed a bill to lift the ban and sent the legislation to the full Energy and Commerce committee to vote on it next week. If the bill makes it to the full House, it is expected to pass on Republican support. But the legislation would face a tough vote in the Senate.

Exports could help independent exploration and production companies such as Continental Resources (CLR), Cabot Oil & Gas (COG) and EOG Resources (EOG). Continental CEO Harold Hamm has been an outspoken supporter of removing the ban.

Continental Resources shares closed up 0.4%. EOG shares climbed 1.5%. Cabot shares rallied 2.4%.

The Energy Information Administration said Thursday that U.S. crude inventories rose by 2.6 million barrels to 458 million barrels in the week ended Sept. 4. Analysts were expecting an increase of only 933,000.

But U.S. crude futures rose 4% to $45.92 per barrel as more demand for gasoline offset the crude buildup. Gasoline inventories rose less than expected, suggesting stronger consumption.

The export ban started in the 1970s as an attempt to protect Americans from price spikes, some of which were caused by Middle Eastern countries using oil as a political weapon.

Studies have shown that ending the ban could lower fuel prices. Because gasoline is pegged to global oil prices, adding more oil to the market would likely push down prices, an Energy Department report said earlier this month.

House Speaker John Boehner has voiced support for ending the ban, and some key Democrats recently have sounded more favorable tones on the issue. But not all politicians are convincedremoving the ban will help the American economy.

Rep. Mike Doyle, D-Pa., said Thursday that repeal would shift U.S. refinery jobs overseas, according to Reuters.

Refiners like Valero Energy (VLO) and their representatives in Congress have been some of the biggest advocates for keeping the ban. Lawmakers from states with a major refining presence also expressed opposition Thursday to removing the export ban.

Rep. Frank Pallone, D-N.J., doubted that American consumers would benefit and warned that refinery jobs would be at risk, while oil producers would see a "significant payday.

Still, momentum for lifting the ban has been growing on Capitol Hill. The Iran nuclear deal, which would allow the country to boost its oil exports, has been a major catalyst.

"It's indefensible to keep the U.S. export ban in place while we are lifting the Iranian crude export ban," Joe McMonigle, a senior energy analyst at the Potomac Research Group, told IBD in a recent interview.