Citi says diesel export ban alternatives being considered

Investing.com -- The U.S. administration is considering alternatives to a diesel export ban, including voluntary cuts, according to a Wednesday report from the Wall Street Journal. The shift comes after several days of building political momentum toward implementing a ban or quota on diesel exports.

Citi analysts said the change in approach could reverse recent equity trading patterns if voluntary cuts become the final outcome. The bank noted that voluntary cuts may have a limited impact on West Texas Intermediate crude prices, potentially reversing the equity trade that has developed over the past week.

The discussion around diesel export restrictions began after recent volatility in the global diesel market and rising domestic prices prompted the administration to review its options, according to a September 22 report from CNBC.

Citi identified energy and production companies with more Brent crude exposure, including Occidental Petroleum (NYSE: OXY) and APA Corporation (NASDAQ: APA), as well as EOG Resources (NYSE: EOG), as potential beneficiaries if a ban were enacted. Companies with greater WTI exposure, such as Diamondback Energy (NASDAQ: FANG), Devon Energy (NYSE: DVN), Permian Resources (NYSE: PR), and Chord Energy (NASDAQ: CHRD), would be less favored under a ban scenario.

In the oilfield services sector, internationally exposed companies including Schlumberger (NYSE: SLB), Baker Hughes (NASDAQ: BKR), TechnipFMC (NYSE: FTI), and Weatherford International (NASDAQ: WFRD) would benefit more than domestic-focused operators such as Patterson-UTI Energy (NASDAQ: PTEN) and Liberty Energy (NYSE: LBRT) if a ban were implemented.

The Brent-WTI spread has expanded beyond $10 per barrel, with Dated Brent trading near $120 per barrel. Dated Brent is currently trading at a premium of approximately $16 per barrel to the prompt month Brent contract, up from about $6 per barrel at the end of July. The Brent-WTI spread on contracts now stands at roughly $11 per barrel versus approximately $5 per barrel at the end of July.

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