US oil exports eye record 5.48M bpd as Hormuz shuts

U.S. monthly crude exports are on track to hit a new all-time high of 5.48 million barrels per day after the Strait of Hormuz shutdown sent buyers in Asia and Europe looking for American supply.

The U.S. Energy Information Administration said U.S. exports of crude and petroleum products rose to nearly 12.9 million barrels per day last week, the highest ever recorded. Kpler data also showed U.S. liquefied natural gas shipments reached a record last month.

Hormuz closure sends Asian and European buyers after U.S. crude cargoes

According to the EIA, Dated Brent traded more than $25 per barrel above the front-month Brent futures contract in early April, which is apparently a very rare gap for two prices that normally stay much closer.

The premium grew because buyers needed real barrels fast after Hormuz traffic stopped. Shipments that should have crossed the strait became uncertain, so refiners had to find other supply.

About 20 million barrels of oil and petroleum products were shipped every day through the strait before the war.

EIA said, “Slow declines in production of these crude oil grades led most Brent price assessments to devise methods to incorporate West Texas Intermediate (WTI), priced at Midland in the United States, into the basket of Brent crude oil grades in 2023.”

The front-month Brent futures contract trades on Intercontinental Exchange (ICE), as it is the main Brent futures contract because both physical oil firms and financial traders use it.

Dated Brent tracks actual cargoes loaded on set dates from selected North Sea terminals. It can also include a WTI shipment delivered to Rotterdam on a CIF basis. After purchase, the oil is sent to a port, then to a refinery, where it is processed into fuels like gasoline, diesel, and jet fuel.

JPMorgan says oil prices still have not risen enough to close the supply gap

JPMorgan (JPM) analyst Natasha Kaneva said the oil market still needs higher prices to deal with the supply shock caused by the Iran war. Brent futures have averaged about $100 per barrel in April, while physical cargo prices have traded closer to $121 per barrel. Kaneva said both prices are still too low to cut demand enough.

Kaneva put the April supply loss at 13.7 million barrels per day. Saudi Arabia and the United Arab Emirates would normally raise output to ease that kind of shortage, but the war has blocked them from exporting through the Strait of Hormuz.

“Nearly all of the world’s spare capacity is concentrated in Saudi Arabia and the UAE, and it was effectively cut off from global oil markets, stripping the industry of its traditional shock absorber,” Kaneva said.

Countries are now pulling from commercial and strategic oil stocks at about 7.1 million barrels per day, which lowers the global gap to 6.6 million barrels per day. Demand is also expected to drop by 4.3 million barrels per day in April, mainly in the Middle East and Asia, where Gulf supply matters most, according to the bank.

“What is striking is that these losses have occurred at prices that do not appear extreme by historical standards,” Kaneva said. “Even so, higher pump prices are starting to curb discretionary driving in the U.S., while rising airfares are beginning to soften jet demand.”

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