Iran war brings US close to net crude exporter for first time since World War II

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HOUSTON – The US nearly became a net crude exporter last week for the first time since World War II, as shipments surged close to a record high to meet demand from Asian and European buyers scrambling to replace Middle East supplies cut by the Iran war.

The US and Israel’s war with Iran triggered the largest-ever disruption to the global energy market, as Iranian threats to shipping stopped around a fifth of the world’s oil and gas supplies from transiting the Strait of Hormuz.

Refiners in Asia and Europe, which depend on those supplies, have bought alternative cargoes from wherever they can, sharply boosting demand for oil from the US, the world’s largest producer.

However, analysts and traders say the US is rapidly approaching its export capacity.

Net imports of crude oil, or the difference between imports and exports, narrowed to 66,000 barrels per day last week, the lowest on record in weekly data going back to 2001, according to US government data released on April 15. At the same time, exports climbed to 5.2 million barrels per day, the highest level in seven months.

On an annual basis, the US was last a net exporter of crude oil in 1943, the data showed.

Rising US crude exports are evidence that Atlantic Basin and Asian buyers are reaching further out for available supply, with regional oil price differentials offsetting shipping costs, said Mr Janiv Shah, vice-president of oil markets at Rystad.

Countries such as Greece have snapped up US crude for the first time in recent months.

About 2.4 million barrels per day, or some 47 per cent of US exports last week, sailed towards Europe, according to ship-tracking service Kpler. Around 1.49 million barrels per day, or about 37 per cent, headed to Asia, up from 30 per cent a year ago.

Top buyers included the Netherlands, France, Germany, Japan and South Korea.

A vessel carrying 500,000 barrels of crude signalled it was en route to Turkey, which would mark the first US export to the country in at least a year, Kpler data showed.

Soaring benchmark Brent makes US oil attractive

Imports to the US, meanwhile, dropped by more than one million barrels per day to 5.3 million barrels per day last week. The US still imports a lot of its crude, as its refineries are designed to take heavier, more sour grades than the light sweet crude it produces.

The disruption to Middle East supplies blew out the premium for Brent crude futures over US West Texas Intermediate crude futures to as much as US$20.69 a barrel in March, reducing US buyers’ appetite for imports, while making US crude attractive to refiners in Europe and Asia.

The price of physical crude oil cargoes for prompt delivery to Europe hit a record high near US$150 a barrel on April 13, and those for Africa hit new peaks, according to LSEG data and traders.

Exports nearing capacity

US exports are likely to touch about 5.2 million barrels per day for April, Kpler analyst Matt Smith said, adding that exports were pushing up against capacity limits on a monthly basis.

The US can export as much as six million barrels per day, traders and analysts said, citing limited pipeline capacity and vessel availability. Its exports hit a record high of 5.6 million barrels per day in 2023, government data shows.

“The market is already testing the export ceiling with 5.2 million barrels per day exported last week. Every incremental barrel from here costs more in freight and logistics than the last one,” according to Dubai-based oil trader Bekzod Zukhritdinov.

A release of medium sour crude from the Strategic Petroleum Reserve could push more light, low sulfur US crude grades out for export, Rystad’s Shah said. But a shortage of tankers and higher freight rates could hurt that export demand, he added.

About 80 empty supertankers were heading to the Gulf of Mexico as at April 15, likely to pick up crude in April and May, said Vortexa senior analyst Rohit Rathod. REUTERS