BY COMFORT OGBONNA
U.S. crude oil exports fell to their lowest level in eight months in July as increased availability of Middle Eastern oil reduced overseas demand for American barrels, according to ship tracking data.
Exports declined to about 3.66 million barrels per day during the month, down significantly from record levels reached earlier in the year when disruptions to Middle Eastern supplies pushed Asian and European buyers to rely more heavily on U.S. crude.
The United States briefly became the world’s leading oil exporter after conflict involving Iran disrupted regional supply flows and forced major energy consumers to seek alternative sources. U.S. crude shipments surged to a record 5.7 million barrels per day in May as buyers turned to American producers to fill the gap.
However, exports began declining after a temporary diplomatic breakthrough between the United States and Iran eased concerns over Middle Eastern oil supplies. A memorandum of understanding reached in June allowed some previously delayed tankers to move through the Strait of Hormuz, increasing available crude supplies in global markets.
During that period, the number of tankers leaving the strategically important waterway rose to as many as 42 per day, helping restore some regional supply and reducing pressure on U.S. exporters.
The shift was particularly visible in Asia, where the share of U.S. crude exports fell to about 40% in July from 52% in June. Major buyers, including Japan and South Korea, reduced purchases of American oil.
Japan, which was the largest buyer of U.S. crude in June and July, cut imports by 67% in July compared with its peak levels in May, bringing purchases down to about 324,000 barrels per day. South Korean imports also declined 39% to approximately 474,000 barrels per day.
Exports to Europe also weakened, falling to about 1.7 million barrels per day in July from a high of 2.5 million barrels per day in May.
Shipments of crude oil released from the U.S. Strategic Petroleum Reserve also slowed during the month, totaling only about 31,000 barrels per day. The limited shipments were directed to France and Peru.
Analysts said strong domestic refinery activity also contributed to lower export volumes by keeping more U.S. crude supplies within the country. Refinery utilization averaged about 96.3% over four weeks, the highest level since 2018, while crude oil processing reached its strongest level in nearly seven years.
Exports Expected to Recover Later in the Year
Despite July’s decline, analysts expect U.S. crude exports to increase in August and September as pricing conditions become more favorable and global demand improves.
The discount between U.S. West Texas Intermediate crude and international benchmark Brent narrowed significantly in June, making American oil less competitive overseas. The average price difference between the two benchmarks fell to $4.17 per barrel in June from $8.16 in May.
Because many U.S. crude grades are priced relative to WTI, a smaller discount can reduce incentives for international buyers to purchase American oil. However, the price gap widened again in July, with WTI trading at a discount of as much as $5.42 per barrel, a development expected to support stronger exports in the coming months.
Shipping activity from the U.S. Gulf Coast has also increased, with more large crude carriers being booked for destinations in Asia and Europe. Industry analysts said demand for very large crude carriers and Aframax tankers has risen as exporters prepare for higher shipment volumes.
Very large crude carriers can transport up to 2 million barrels of oil, while Aframax vessels typically carry around 750,000 barrels.
Energy analysts expect U.S. crude exports to exceed 4 million barrels per day in both August and September, although volumes are unlikely to return to the record levels above 5 million barrels per day seen earlier this year.
Forecasts estimate exports could average about 4.58 million barrels per day in August and 4.45 million barrels per day in September.
Analysts said the United States could be called upon to increase exports further if tensions in the Middle East worsen and disrupt global energy supplies again. The country currently has export capacity of roughly 6 million barrels per day, though actual volumes depend on pipeline availability, tanker capacity, and loading schedules.
Original article
Comments