U.S. oil exports in July fell to 3.66 million barrels per day, the lowest level in eight months, ship tracking data showed, as a short-lived peace deal between the U.S. and Iran in June briefly flooded markets with Middle Eastern oil and diminished demand for American crude abroad. The U.S. had cinched the spot as the world’s top oil exporter this year after the Iran war sharply cut supplies of Middle Eastern crude and forced Asian and European countries to turn to the U.S. to fill the gap. Shipments of U.S. oil surged to 5.7 million bpd in May, a monthly record. However, they have come off steadily since then. A memorandum of understanding signed between Washington and Tehran in June briefly helped stuck tankers to navigate through the Strait of Hormuz, adding supply to oil markets. The number of tankers exiting the strait in a day peaked at 42 during the peace deal period. The share of U.S. oil exports to Asia shrank to about 40% in July from 52% in June, with top buyers including Japan and South Korea taking fewer shipments. Cargoes to Japan, the top buyer in June and July, fell 67% to 324,000 bpd in July from a peak in May, while shipments to South Korea fell 39% to 474,000 bpd. Shipments to Europe also shrank to about 1.7 million bpd in July from as much as 2.5 million bpd in May. Exports of crude oil released from the U.S. government’s Strategic Petroleum Reserve also slowed, totaling just 31,000 bpd in July. The two shipments headed to France and Peru, Kpler data showed.
High refinery utilization in the U.S. also kept barrels away from the export markets, said Rohit Rathod, an analyst at Vortexa. The four-week average U.S. refinery utilization stood at about 96.3%, the highest rate since 2018, according to data from the U.S. Energy Information Administration, with input of crude oil to U.S. refineries at its highest level in about seven years.
EXPORTS SET TO RISE IN AUGUST AND SEPTEMBER
U.S. West Texas Intermediate crude’s discount to globally traded Brent also narrowed significantly in June, when deals for July shipments are typically made, further hurting exports. WTI’s discount to Brent averaged just $4.17 per barrel, compared with a discount of $8.16 in May. Since most U.S. grades are priced as a differential to WTI, when the benchmark becomes cheap relative to Brent, it encourages more exports from the U.S. The spread between the two has widened more recently, with WTI trading at a discount of as much as $5.42 in July, which should encourage exports in August and September, analysts said. Ship fixtures out of the U.S. Gulf Coast for exports over the last few days have been extremely busy, with a larger-than-normal amount of Very Large Crude Carriers fixed to Asia and Europe and Aframax tankers booked as well, said Scott Shelton, energy specialist at TP ICAP. A Very Large Crude Carrier can move up to 2 million barrels, while Aframax tankers can move about 750,000 barrels.
“U.S. exports are clearly on their way up for crude,” Shelton said. Export volumes in August and September are expected to exceed 4 million barrels per day, Vortexa’s Rathod said, although they are unlikely to reach the levels above 5 million bpd seen in April and May. Exports were forecast to be around 4.58 million bpd in August and 4.45 million bpd in September, according to research and consultancy firm Energy Aspects.
The U.S. could be called upon to boost exports further if the conflict in the Middle East escalates, said Ben Cook, portfolio manager of the Hennessy Energy Transition Fund. The U.S. has a monthly export capacity of about 6 million bpd, traders and analysts have said, citing limited pipeline capacity, vessel availability and loading schedules.
(Reporting by Arathy Somasekhar in Houston and Siddharth Cavale in New York; Editing by Nathan Crooks and Paul Simao)