U.S. crude exports to hit 5.48M bpd after Hormuz closure

U.S. crude exports are on track to reach a record 5.48 million barrels per day after the Strait of Hormuz closure this week pushed buyers in Asia and Europe toward American cargoes. The U.S. Energy Information Administration reported that U.S. exports of crude and petroleum products rose to nearly 12.9 million barrels per day last week, the highest weekly total on record. Kpler data showed U.S. liquefied natural gas shipments also hit a monthly record.

The shutdown of traffic through the Strait of Hormuz disrupted shipments that previously carried about 20 million barrels per day of oil and petroleum products. The EIA noted that Dated Brent traded more than $25 per barrel above the front-month Brent futures contract in early April. The agency attributed the premium to buyers needing immediate deliveries; Dated Brent tracks actual cargoes loaded on set dates from selected North Sea terminals and can include a West Texas Intermediate shipment delivered to Rotterdam on a CIF basis. The front-month Brent futures contract trades on the Intercontinental Exchange.

JPMorgan analyst Natasha Kaneva estimated the April supply loss at 13.7 million barrels per day and calculated that withdrawals from commercial and strategic stocks at about 7.1 million barrels per day have cut the shortfall to roughly 6.6 million barrels per day. Kaneva wrote: “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.”

JPMorgan also forecast a demand decline of about 4.3 million barrels per day in April, concentrated in the Middle East and Asia. Kaneva noted that price levels have not yet reduced consumption enough and added: “What is striking is that these losses have occurred at prices that do not appear extreme by historical standards.” Kaneva added that higher pump prices are starting to curb discretionary driving in the U.S. and that rising airfares are beginning to soften jet fuel demand.

Market prices reflected the strain: Brent futures averaged about $100 per barrel in April, while physical cargo prices traded closer to $121 per barrel. The gap between paper and physical markets showed the premium buyers were willing to pay for immediate delivery. Once purchased, the crude is shipped to ports and delivered to refineries where it is processed into gasoline, diesel and jet fuel. The redirection of Asian and European buying toward U.S. crude has lifted American export volumes as refiners and traders seek alternative supplies.