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The crude export numbers from the US last week were pretty amazing. 4.46mbpd, was much bigger than it had ever been. But was it really that surprising to see it the last week of the year? Answer probably not. Why?

2. Because at the end of the year liquids in Tanks are taxed by certain states due to their change in value, I.e. the appreciation of an asset. This tax is determined on a LIFO (last in first out), therefore it is compared to the price at the end of last year effectively.
3. In years where prices have appreciated you typically see an end of year draw down and years where the price has fallen you will see inventory builds.
4. This year saw a very big appreciation of nearly 34%. On 31st December price of WTI was around $46-$48 per barrel, while on 31st December 2019 it was $60-$61 per barrel. Therefore companies would face tax bills.
5. Most ship tracking last week suggested that nothing special like this had happened and were expecting exports to be around 3.4mbpd. So what has happened?
6 what has not happened is the exports have been affected by the adjustment factor. The number reported by the EIA is the number given to them by the customs guys.
7. So what may have happened?

When the paperwork is presented to the customs for the exportation of the crude, it can be done up to 10 days before the exportation or 7-10 days after.
8. In this case I would expect companies to present paperwork early. They have sold the oil but will loaded after the 1st of Jan. By presenting the paperwork early they will have customs documents saying they have exported before that date so that crude will not be subject to tax
9. The oil may have been sold, the extra oil may have been producers stuffing their overseas refineries to prevent having to pay the tax. You may also see some of this crude re-imported.
10. What will be interesting to watch is not next weeks numbers because that will still include pre-end of the year dates, but the week after. Also watching imports over the next couple of weeks will be interesting.
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