A $12 Billion Clean-Energy Tool That U.S. Tax Reform Could Kill

The tax-reform proposal moving through the U.S. Senate would hobble -- and potentially cripple -- the supply of tax-equity investment, an esoteric but critical source of clean-energy finance.

About half the companies that invest in tax equity for solar farms, and a majority of wind investors, may find the new tax policies make these deals irrelevant, according to John Marciano, co-head of project finance at Akin Gump Strauss Hauer & Feld LLP.

That poses a threat to the tax-equity market, which is expected to reach $12 billion this year up from $7.3 billion in 2013, according to Bloomberg New Energy Finance. The financing format accounted for about 21 percent of the $58.5 billion of total U.S. renewable-energy investment in 2016.

“It literally will grind our industry to a halt,” Marciano said. “Developers would be fighting for the few remaining investors.”

Tax Credits

In tax-equity deals, renewable-energy developers sell portions of their projects’ tax credits to corporations -- often banks and some insurance companies -- that can apply the credits to their own tax bills.

Most tax-equity investors are multinational companies and the issue now is that the Senate version of the tax-reform bill includes a provision that imposes a minimum tax on these companies’ foreign transactions. If they have to pay a minimum tax, they may no longer have any need for the credits acquired through tax-equity deals.

The wind and solar industries have been bracing for tax reform since President Donald Trump’s surprise election. Analysts initially warned that lowering corporate tax rates, still a key component of the bill, may deplete interest in tax-equity deals because companies with lower tax bills would have less interest in buying tax credits from renewable-energy developers. The proposal from Senate Republicans, with its minimum foreign tax provision, was something unexpected.

“It would be draconian for tax-equity investors with foreign parents,” said David Burton, who leads Mayer Brown LLP’s renewable-energy group in New York.

Wall Street hits a lull even as technology stocks gain

Wall Street turned weary in late morning trading on Wednesday, with a slide in energy stocks and Home Depot offsetting gains in technology sector as investors readjust their stock holdings.

Shares of Microsoft (MSFT.O), Facebook (FB.O) and Google parent Alphabet (GOOGL.O) rose more than 1 percent.

The Nasdaq had slipped 1.6 percent in the past three days, its worst such fall in more than three months amid doubts over stretched valuations and the impact of a U.S. tax overhaul on corporate earnings.

“To the end of the year, investors tend to reposition, making sure their portfolio finishes the year where they wanted and begins the next year where they hope to be,” said Sean O‘Hara, director at Pacer Financial Inc.

Investors are evaluating the details of the new tax code as the Senate Republicans attempt to reconcile their version of the bill with that of the House of Representatives.

The bill passed on Saturday by Republican senators included a last-minute change to retain the corporate alternative minimum tax, or AMT, which had initially been removed.

Including the AMT could negate parts of the bill seen as beneficial to tech companies and other corporations.

At 10:56 a.m. ET (1556 GMT), the Dow Jones Industrial Average .DJI rose 0.12 percent to 24,209.73 and the S&P 500 .SPX gained 0.11 percent to 2,632.53.

The Nasdaq Composite .IXIC was up 0.17 percent at 6,773.39.

Home Depot (HD.N) slipped 1.5 percent after gaining about 36 percent this year, following the home improvement chain’s announcement of a $15 billion share repurchase plan.

The stock was the biggest drag on the S&P 500 and the Dow.

H&R Block (HRB.N) rose about 7 percent after the tax preparation service provider reported better-than-expected revenue.

Oil slipped more than 1 percent after a surprise rise in U.S. inventories of refined products that suggested demand may be flagging.

Newfield Exploration (NFX.N) fell 3.4 percent and Range Resources (RRC.N) slipped 2.7 percent, the biggest decliners on the S&P energy index .SPNY.

Declining issues outnumbered advancers on the NYSE by 1,430 to 1,272. On the Nasdaq, 1,530 issues fell and 1,179 advanced.

US companies are the biggest losers from sanctions, Iran's energy minister says

The Iranian oil minister claimed that energy-related firms from the U.S. are the main losers from the sanctions placed against his country.

Iran's oil-dominated economy has been hampered by sanctions put in place by the U.S. since the Iranian Revolution of 1979. In 2016, many restrictions were removed, but Washington has continued to bar American citizens and companies from most forms of investment or trade with the country.

Speaking at the OPEC meeting in Vienna Thursday, Iran's Oil Minister Bijan Zangeneh, said the policy was both confusing and self-defeating.

"I don't understand why U.S. companies cannot enter the Iranian market. They cannot get involved in the biggest oil projects in the world, taking place here in Iran," he said.

Zangeneh said Iran had "no difficulty" with U.S. expertise or capital and that his country needed billions of dollars of investment to complete several major projects designed to ramp up Iranian oil output.

The OPEC veteran said the U.S. restrictions hadn't prevented companies from other nations signing up to invest.

"So far everything is going well. We hope we can sign some contracts before the end of this Iranian calendar year," he said.

Zangeneh said contracts for oil infrastructure development were typically around three years long and would not be greatly affected by any OPEC agreement made at the current meeting.

Oil traders expect a group of OPEC and non-OPEC countries to announce Thursday that an agreed cap to supply levels will be extended by nine months, taking it until the end of 2018.

Is U.S. biofuel in jeopardy?

A new one-step process that turns spent coffee grounds into biofuel could help in the fight to reduce our reliance on diesel made from fossil fuels, say researchers at Lancaster University. Video provided by Reuters Newslook

Last week, DuPont Industrial Biosciences announced that they shut down operations at an Iowa ethanol plant just two years after it opened.

As the plant closed its doors, 90 employees were told they had just 45 minutes to evacuate the premises, and any stragglers would be escorted out by the local police. A small skeleton crew remains to maintain the facility until DuPont is able to sell it.

DuPont, a branch of DowDuPont Inc, made this decision to shy away from producing ethanol from corn waste at the same time that politics are shifting from biofuels and renewables in the U.S.  While DuPont said that the Iowa plant closure has more to do with their merger with Dow than anything else, local organization Iowa Renewable Fuels said it’s clearly a symptom of low government support and lack of tax credits.

Under the new management brought on by the Trump administration, The Environmental Protection Agency (EPA) made a major effort this year to cut down the required quantity of cellulosic biofuels to be mixed into the nation’s fuels, walking back a Bush-era mandate. The EPA argues that the industry has not produced enough of these cellulosic biofuels to keep the policy realistic. Cellulosic biofuels are fuels created from inedible plant waste like husks and stems, as well as non-food plants such as grasses and seaweed.

When the DuPont plant was opened in 2015 at a construction cost of $225 million, it was widely publicized as the world’s largest cellulosic ethanol plant. The facility utilized corn stalks and stems (a resource more than plentiful in Iowa) to make ethanol, with a production capacity of 30 million gallons per year, to be blended with gasoline to aid refineries’ compliance of the U.S. Renewable Fuel Standard, instated in 2005 and expanded in 2007

When the ethanol-blending portion of the mandate was passed in 2007, with the hope of reducing U.S. dependence on foreign oil, the EPA predicted that by 2020 domestic ethanol production would be at one billion gallons per year. It’s become evident that this won’t be the case. Output for 2017 is expected to be around 7 million gallons.That’s a far cry from those original, optimistic numbers, thanks to high production costs and still-evolving technologies.

Now, in an ironic twist, the government’s response to insufficient biofuel production will cause the nation to have even less. The EPA made their proposal to cut biofuel blending requirements in July, with the goal to slash this year’s 311 million gallons to 238 million gallons in 2018, reversing the previous requirement to increase the ethanol blend each year.

Inside the oil industry, however, there are many that feel the Trump administration and the EPA have not done enough to overhaul biofuel requirements and “drain the swamp.” Notably, just one day before DuPont shuttered its ethanol plant, the chief executive of Icahn refinery CVR Energy accused Trump of caving in to corn-state fuel refiners by failing to completely overhaul the federal biofuel agenda. Icahn was previously a special adviser to Trump on regulations, but left the unpaid position amidst criticism that he stood to make a lot of money off of his proposed policy changes.

Perhaps unsurprisingly, DuPont is not the first company to start unloading its biofuel facilities. DuPont’s competition, Abengoa, sold its 25-million-gallon Kansas facility almost a year ago. DuPont itself has been showing signs of trouble since last year, when they stopped collecting corn stocks from local farmers because they’d run out of storage. DuPont said that they don’t intend to move away from biofuels completely, but shuttering the world’s largest cellulosic plant just two years after its lauded opening doesn’t bode well for the sector’s future.

Boom! Weekly US crude oil production hits an all-time high

U.S. crude oil production hit an all-time high last week, according to preliminary government data, in another sign of the resilience of American shale drillers.

The United States produced 9.62 million barrels of oil a day in the week through Nov. 3, the U.S. Energy Information Administration reported on Wednesday. That just slightly topped a high struck in June 2015, just before the oil price crash sparked a more than one-year decline that sent U.S. output to about 8.4 million barrels a day.

To be sure, the weekly figures are subject to revision, but the latest data adds to signs of stubbornly high U.S. output and are likely to weigh on markets. Last week, the EIA's Petroleum Status Report showed U.S. exports at an all-time high above 2 million barrels a day.

U.S. West Texas Intermediate crude prices initially extended losses on Wednesday after the latest report, which also showed oil sitting in storage in the United States unexpectedly rose last week. Futures recovered slightly but were still trading lower.

U.S. shale drillers, who use advanced drilling methods to unlock oil and gas from rock formations, have frustrated efforts by major oil producing nations to reduce brimming global crude stockpiles and boost prices.

OPEC and other exporters are keeping about 1.8 million barrels a day out of the market in order to end a persistent glut of crude oil.

Morgan Stanley raises its oil price forecast, warns US shale may struggle to meet demand

Morgan Stanley has raised its forecast for oil prices through 2020, saying the world is hungry for more U.S. shale crude at a time when it's uncertain American drillers can deliver it.

The bank now sees international benchmark Brent crude fetching $62 a barrel in the final quarter of the year, up from an earlier estimate of $55. U.S. West Texas Intermediate crude is poised to average $56 for the quarter, up from Morgan Stanley's prior $48 call.

By the second quarter of 2018, Morgan Stanley forecasts Brent will average $63 and WTI will trade at $58 a barrel.

Demand for oil is growing at a surprisingly high rate, leading to a rapid drop in U.S. crude inventories, Morgan Stanley says. At the same time, OPEC and other oil exporters including Russia are likely to extend a deal to keep 1.8 million barrels off the market through next year.

Outside of OPEC, there is little growth in oil supplies, with the exception of the United States, where drillers can quickly tap shale wells, the bank notes. But even in the U.S. Lower 48, the number of rigs operating in oilfields has been falling.

To balance the market, U.S. shale drillers will have to grow production from about 5.9 million barrels a day this year to 7 million barrels a day in 2018, more than previously thought, Morgan Stanley analysts conclude. That would require drillers to start standing up 8 to 10 new rigs each month, but the analysts are uncertain that will happen.

"Right when the world's reliance on shale is growing, its limits are starting to become apparent, and there seem to be two aspects to this: ability and willingness," they wrote in a research note on Monday.

Companies say bottlenecks are forming because they cannot book the crews and equipment needed to carry out hydraulic fracturing, the process of injecting water, minerals and chemicals underground to break up shale rock formations and allow oil and gas to flow to the wellhead. Costs for oilfield services are also rising.

At the same time, exploration and production companies are reining in production growth in order to put their finances in order. Drillers may be reluctant to dive deeper into the red to fund growth at a time when investors are asking for financial discipline.

US shale oil will dominate the market in coming years, but the tables will turn, OPEC says

The American shale drillers that have upended the energy industry will capture much of the growth in oil demand in the coming years, OPECforecasts in a new report.

But after years of booming U.S. production and flat output from OPEC, the tables will turn, the producer group says.

The forecast, released Tuesday, signals that OPEC believes its battle for oil-market share against U.S. shale will persist for years to come.

The U.S. shale revolution paved the way for a three-year oil price downturn that sent crude spiraling from more than $100 a barrel in 2014 to about $60 today. That has piled pressure on the oil-dependent economies of OPEC nations and forced a round of production cuts this year.

The forecast for oil demand looks stronger than it did last year, according to OPEC. The group's prognosticators raised their projections for oil demand in 2022 by 2.2 million barrels a day in this year's World Oil Outlook report.

That's largely due to strong consumption in the developing world. But OPEC also expects demand to keep growing in developed countries until 2019, rather than peaking this year as earlier forecast.

OPEC now sees demand reaching 102.3 million barrels a day in 2022, up from 95.4 million barrels a day in 2016.

The United States will meet much of the world's growing appetite, increasing its oil output by 3.8 million barrels a day through 2022, OPEC says. That will be equal to about 75 percent of all supply growth outside the 14-member OPEC, which provides about one-third of the world's crude.

Much of that growth will come from U.S. shale fields, where drillers use advanced methods like hydraulic fracturing to coax oil and gas from shale rock formations.

However, OPEC sees production of this so-called tight oil from the United States and elsewhere — including Canada, Russia and Argentina — peaking in 2025. Output will boom in part because shale producers are focusing on drilling their best acreage, where they can extract oil and gas at relatively low cost. Shale wells initially produce a lot of oil, but their output declines rapidly.

"This growth is heavily front-loaded, as drillers seek out and aggressively produce barrels from sweet spots in the Permian and other basins," OPEC said, referring to the epicenter of the U.S. drilling activity in Texas and New Mexico.

Around the same time that shale production peaks, years of weak growth from OPEC nations will come to an end, in the group's view.

After stagnating at just more than 33 million barrels a day, OPEC's output will raise sharply to 41.4 million barrels a day by 2040. In that case, OPEC's share of the global market for crude oil and other liquids will grow from 40 percent last year to 46 percent in 2040.

"Thus, the long-term focus for additional liquids demand remains on OPEC," the group said.

Oil demand will grow to 111.1 million barrels a day by 2040, but that growth will slow down as the years grind on, according to OPEC's latest forecast.

By 2040, OPEC thinks oil and natural gas will still account for more than half of the world's total power generation.

U.S. withdrawal from energy transparency group called strategic

Leaving a transparency initiative on fossil fuels was a mistake, advocates said, but Washington and a former Trump associate said the decision was strategic.

The U.S. Interior Department last week withdrew from the Extractive Industries Transparency Initiative, a body that seeks to find how revenue tied to the oil, gas and mineral resources sectors makes its way through member-state governments and economies.

In its letter of withdrawal, the department said it supports transparency mechanisms in principle, but had its own reporting standards that were the "new global standard in revenue governance transparency." Because EITI standards do not account for the U.S. legal framework, it was leaving the organization as an implementing country.

The U.S. government endorsed the EITI in 2004 and committed to its standards in 2011. When the EITI boards approved the U.S. application in 2014, it became the first member of the Group of 8 industrialized nations to achieve candidacy.

EITI Chairman Fredrik Reinfeldt said in a statement after the withdrawal notification that it was a step backward for the United States.

"Our work supports efforts to combat transnational crime and terrorist financing," he said. "It's important that resource-rich countries like the United States lead by example."

U.S. momentum as an oil and gas producer accelerated under former President Barack Obama. President Donald Trump has put fossil fuels at the top of his energy policies. Though Obama ended a ban on crude oil exports, the amount of U.S. oil leaving domestic shores has accelerated exponentially since Trump took office.

Republican leaders who support Trump's energy strategy have said steps taken since Ryan Zinke became the secretary of the Interior have positioned the United States as "an energy dominant superpower."

The four-week moving average for total U.S. oil production for the week ending Oct. 27 was 9.2 million barrels per day, up nearly 9 percent from the same period last year. U.S. crude oil exports for the same period are up 300 percent from last year.

U.S. crude oil is competitive in Asia with the type of oil exported by members of the Organization of Petroleum Exporting Countries. Natural gas, in the form of a super-cooled liquid form, and coal have made their way to the ports of former Soviet republics during the Trump administration, to the frustration of the Kremlin.

Healy E. Baumgardner, a global fossil fuel adviser at The 45 Group, former Trump campaign spokeswoman and the former press secretary for the Energy Department under President George W. Bush, told UPI the candidacy to EITI was short-sighted.

"Fossil fuels are critical to national security and energy independence, and pulling out of EITI smartly supports their expansion, competitiveness and ability to foster job growth and U.S. energy dominance at home and abroad," she said.

Canada, the No. 1 oil exporter to the United States, is not an EITI member, nor are most major OPEC members.

The U.S. decision to leave EITI came two days before the release of the so-called Paradise Papers. The more than 13 million records, leaked by Bermuda-based law firm Appleby to German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists, allege to expose ties between world leaders and corporate giants. For the United States, the documents appear to show links between Trump Cabinet officials, donors and advisers, and offshore interests ranging from the Kremlin to foreign oil.

The documents show Commerce Secretary Wilbur Ross retains an interest in a shipping company, Navigator Holdings, which has business ties to Sibur, a Russian energy firm controlled by Gennady Timchenko, a Russian oligarch subject to U.S. sanctions, Russian President Vladimir Putin's son-in-law, Kirill Shamalov, and other members of the Russian president's inner circle.

U.S. Secretary of State Rex Tillerson, documents show, was tied to Yemeni oil and gas interests, which later became the subject of dispute in the international courts.

"The opacity of this administration goes beyond energy policy," Stefanie Ostfeld, the deputy head of the U.S. office of Global Witness, told UPI. "You can draw a direct line from the president and Secretary Tillerson refusing to release their tax returns to Exxon and Chevron refusing to declare their U.S. tax payments though EITI, which led the administration to pull out of a global anti-corruption program for oil and gas companies."

Andrew Holland, a senior fellow for energy and climate at the American Security Project, added that U.S. oil companies are some of the best in the world and shouldn't have to "bribe their way" toward contracts. The EITI move, as well as similar actions, sets the industry up to look corrupt, he said.

In its letter last week, the U.S. Interior Department said participating in EITI helped the government initiate open data on natural resources and their revenue streams. Despite leaving the initiative, the government said it was a strong supporter of good governance.

"While in concept preventing corruption in global fossil fuels is admirable, they are what determine power, politically and physically, across the globe," Baumgardner said.

US Signs Deal With Denmark To Expand Offshore Wind Energy Cooperation

A new deal calling for further cooperation in the offshore wind energy sector has been signed by the US and Denmark, thanks to a fairly positive view of wind energy within the Trump Administration, according to recent reports.

The new agreement means that top Europe-based wind energy firms, such as DONG Energy and Vestas, should have an easier time developing projects and relationships within the US market.

“We see some positive initiatives coming out of the administration in Washington,” commented the head of DONG’s US business, Thomas Brostroem, in an interview with Reuters, while referencing efforts to streamline on the federal level the permitting process for offshore wind energy projects. “They’ve been really receptive to talk to European countries and developers to get know-how from the past decades.”

Reuters provides more: “Danish companies DONG Energy and Vestas had feared the nascent US offshore wind sector would be stymied after President Trump vowed to revive the coal industry, challenged climate-change science and blasted renewable energy as expensive and dependent on government subsidies. But both companies now say the Trump administration is increasingly looking at Europe’s experience as it seeks to kick-start the sector.

“The US offshore wind sector, which has lagged behind Europe, is at a critical juncture, with the first large-scale offshore wind auction in Massachusetts coming up in December. But to gain traction, industry executives and experts say the United States will need to replicate the dramatic cost cuts which Europe has implemented.”

This news follows on the continuing growth of the European offshore wind energy sector in recent years — with more than 12 gigawatts (GW) of offshore wind energy generation capacity now installed in the region.

“It is a huge scoop that we now get a formal cooperation with the Trump administration on offshore wind,” stated Danish climate and energy minister Lars Chr Lilleholt. “There’s no doubt that this is a sleeping giant.”

No, this indeed does not match well with what we’ve otherwise seen from the Trump administration on energy, but perhaps there is some hope in policies around this renewable energy arena.

Oil prices steady near 2-year highs as market tightens

Oil prices steadied near two-year highs on Thursday as some investors booked profits, traders said, but the market outlook remained upbeat as OPEC-led supply cuts tightened the market and drained inventories.

Brent crude LCOc1 was up 12 cents or 0.2 percent to $60.61 per barrel by 1:24 p.m.(1724 GMT). On Wednesday, Brent reached $61.70, its highest intraday level since July 2015. The contract is up by more than a third from its 2017-lows in June.

U.S. light crude CLc1 was up 13 cents, or 0.2 percent, to $54.43, almost 30 percent above its 2017-lows in June.

Confidence has been fueled by an effort this year lead by the Organization of the Petroleum Exporting Countries and Russia to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets.

Saudi Arabian Energy Minister Khalid al-Falih said supply and demand balances were tightening and oil inventories falling, while compliance with the OPEC-led pact to curb supplies had been “excellent”.

“Compliance as a whole for OPEC [ended] up being rather strong,” said Mark Watkins, regional investment manager at U.S. Bank. “Now that we’ve flipped the calendar to November we have the OPEC meeting at the end of the month. There’s expectation that there will be positive comments about extending the cuts past March.”

The pact to withhold supplies runs to March 2018, but there is growing consensus to extend the deal to cover all of next year.

Iraq’s oil minister said that OPEC’s second-largest producer supports keeping curbs on global oil supply to bolster prices, adding $60 per barrel would be an acceptable target price for his country.

Oil was also supported by falling U.S. commercial crude inventories despite rising output.

U.S. crude oil inventories fell 2.4 million barrels last week despite a 46,000 bpd increase in production to 9.55 million bpd.

Goldman Sachs said it expected year-on-year U.S. oil production growth of 0.8 million to 0.9 million bpd at year-end 2017. That would put end-2017 output at 9.6-9.7 million bpd, close to its highest for at least three decades.

On Thursday the CEO of U.S. independent oil producer Pioneer Natural Resources said it expected to export 2.3 million barrels of oil in the fourth quarter.

Traders said this was due to U.S. crude trading at a wide discount to Brent, making exports attractive. CL-LCO1=R

Analysts will be watching Friday’s rig count data from U.S. producers said U.S. Bank’s Mark Watkins.

“If rig counts didn’t increase with oil prices being at a higher level then we may be seeing a high water mark in the U.S. shale production at this time.”

Oil slips, erases gains as U.S. crude draw shy of API report

Oil prices dipped in see-saw trade on Wednesday, hitting their highest in more than two years and then retreating after weekly U.S. government inventory data showed the latest crude stock draw was not as big as an industry trade group had reported.

While oil settled lower, both global marker Brent LCOc1 and U.S. crude CLc1 benchmarks remained near the highest levels since July 2015, as lower global supply pushed markets higher.

“The market had a bit of a pull back today...prompted by a bit of profit taking,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.

“But, overall, the idea that the (OPEC) production cut will extend through 2018 and increased demand is tightening the supply balance and driving us higher overall.”

The U.S. Energy Information Administration (EIA) said crude stocks fell 2.4 million barrels last week, exceeding the 1.8 million barrel draw analysts forecast in a Reuters poll, but short of the 5.1 million barrel decline reported late on Tuesday by the American Petroleum Institute (API). <EIA/S> <API/S> [ENERGYUSA]

“Oil prices fell since the release of the (EIA) report,” said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany, noting that the crude draw was “significantly less than the API numbers.”

Brent futures LCOc1 settled down 45 cents, or 0.74 percent, at $60.49 a barrel, while U.S. West Texas Intermediate crude CLc1 was down 8 cents, or 0.15 percent at $54.30 a barrel.

Before the EIA report, Brent was trading at its highest since July 2015 on data showing OPEC had significantly improved compliance with its pledged supply cuts and Russia was widely expected to keep to the deal.

Meanwhile, the WTI “Dec Red” - the spread between December 2017 and 2018 U.S. crude CLZ7-Z8 - traded to as high as $1.83 a barrel, the strongest level since February 2014 before the oil price crash. WTI Dec 2017’s premium to 2018 suggested that the end of the crude glut may be in sight.

On Wednesday, Gulf OPEC sources said members of the Organization of Petroleum Exporting Countries was likely to continue its oil production curb through 2018. Member countries are scheduled to next meet in Vienna on Nov 30.

OPEC’s October output fell 80,000 bpd to 32.78 million bpd. Adherence to its pledged supply curbs rose to 92 percent from September’s 86 percent.

Analysts and traders expect Russia to stick to its agreement to curb oil output by 300,000 bpd from 11.247 million bpd reached in October 2016.

U.S. oil exports boom, putting infrastructure to the test

Tankers carrying record levels of crude are leaving in droves from Texas and Louisiana ports, and more growth in the fledgling U.S. oil export market may before long test the limits of infrastructure like pipelines, dock space and ship traffic.

U.S. crude exports have boomed since the decades-old ban was lifted less than two years ago, with shipments recently hitting a record of 2 million barrels a day. But shippers and traders fear the rising trend is not sustainable, and if limits are hit, it could pressure the price of U.S. oil.

How much crude the United States can export is a mystery. Most terminal operators and companies will not disclose capacity, and federal agencies like the U.S. Energy Department do not track it. Still, oil export infrastructure will probably need further investment in coming years. Bottlenecks would hit not only storage and loading capacity, but also factors such as pipeline connectivity and shipping traffic.

Analysts believe operators will start to run into bottlenecks if exports rise to 3.5 million to 4 million barrels a day. RBC Capital analysts put the figure lower, around 3.2 million bpd.

The United States has not come close to that yet. A total of the highest loading days across Houston, Port Arthur, Corpus Christi and St. James/New Orleans - the primary places where crude can be exported - comes to about 3.2 million bpd, according to Kpler, a cargo tracking service.

But with total U.S. crude production currently at 9.5 million barrels a day and expected to add 800,000 to 1 million bpd annually, export capacity could be tested before long. Over the past four weeks, exports averaged 1.7 million bpd, more than triple a year earlier.

“Right now, there seems to be a little more wiggle room for export levels,” said Michael Cohen, head of energy markets research at Barclays.

“Two to three years down the road, if U.S. production continues to grow like current levels, the market will eventually signal that more infrastructure is needed. But I don’t think a lot of those plans are in place right now.”

If exports do hit a bottleneck, it would put a ceiling on how much oil shippers get out of the country. Growing domestic oil production and limited export avenues could sink U.S. crude prices.

Shippers have booked vessels to go overseas in recent weeks because the premium for global benchmark Brent crude widened to as much as $7 a barrel over U.S. crude, making exports more profitable for domestic producers.

EXPORT PLANS

Exports could hit 4 million bpd by 2022, an Enterprise Products Partners LP executive told an industry event in Singapore recently.

Though some operators are already eyeing expansion plans, there are limitations, said Carlin Conner, chief executive at SemGroup Corp, which owns the Houston Fuel Oil Terminal. SemGroup has three docks for exporting crude and is building additional ones.

“There aren’t very many terminals with the needed pipeline capabilities, tank farm capacity and proper docks to load the ships ... Adding this is expensive and not done easily. So there are limitations to unfettered export access,” he said.

For instance, exports are expected to start from the Louisiana Offshore Oil Port (LOOP) in early 2018 at around one supertanker a month, according to two sources. The LOOP is potentially a key locale for exports. Its location 18 miles (29 km) offshore means it can handle larger vessels than other, shallower ship channels.

While LOOP can load around 40,000 barrels per hour, operating at that capacity is not likely because that same pipe is used to offload imports, the sources added. LOOP did not respond to a request for comment.

In Houston, when looking at the top 30 loading days, crude exports averaged 700,000 bpd, Kpler added. That includes Enterprise’s Houston terminal, among the largest of the export facilities, that had 615,000 bpd.

Other terminal operators are also developing additional facilities. NuStar Energy LP currently can load between 500,000 to 600,000 bpd at its two docks in Corpus Christi, which has about 1 million in capacity, according to a port spokesman. NuStar is developing a third dock, which should come online either late first quarter or early second quarter.

In Houston, Magellan Midstream Partners LP is planning a new 45-foot draft Aframax dock for mid-2018. Aframax vessels can carry about 500,000 to 700,000 barrels of crude.