US oil exports fell to an eight-month low in July as a temporary Iran peace deal restored West Asian crude supplies, reducing demand from Asian and European buyers for American oil
A brief peace deal between the United States and Iran has sharply cooled demand for American crude, dragging US oil exports to their lowest level in eight months as Asian and European buyers turned back to cheaper West Asian supplies.
US crude exports averaged 3.66 million barrels per day (bpd) in July, down from a record 5.7 million bpd in May, according to ship-tracking data, as reported by Reuters. The decline marks a dramatic reversal for the world’s largest oil exporter, which had benefited from supply disruptions caused by the Iran conflict earlier this year.
Gulf supplies return
The downturn followed a memorandum of understanding signed between Washington and Tehran in June that temporarily eased tensions and allowed oil tankers stranded around the Strait of Hormuz to resume normal transit.
The reopening of the strategic waterway boosted the availability of West Asian crude, reducing the need for refiners in Asia and Europe to source barrels from the United States.
The number of tankers exiting the Strait of Hormuz peaked at 42 a day during the brief period of calm, helping restore supplies to global markets.
The shift was particularly evident in Asia, where the US share of crude exports dropped to about 40 per cent in July, down from 52 per cent in June.
More from BusinessJapan, the largest buyer of US crude during June and July, slashed imports by 67 per cent to 324,000 bpd in July from May’s peak. Shipments to South Korea also fell 39 per cent to 474,000 bpd.
Exports to Europe declined as well, slipping to around 1.7 million bpd in July from as much as 2.5 million bpd in May.
Price advantage narrows
The decline was also driven by changing price dynamics.
The discount of US benchmark West Texas Intermediate (WTI) crude to global benchmark Brent narrowed sharply in June, making American crude less competitive in international markets.
WTI traded at an average discount of $4.17 per barrel to Brent in June, compared with a discount of $8.16 per barrel in May. Since most US crude grades are priced relative to WTI, a narrower spread reduces the incentive for overseas buyers to purchase American barrels.
At the same time, strong domestic refining activity kept more crude within the United States.
According to the US Energy Information Administration, the four-week average refinery utilisation reached 96.3 per cent, its highest level since 2018, while crude processing climbed to its strongest level in about seven years.
Higher refinery runs left fewer barrels available for export, said Rohit Rathod, an analyst at Vortexa.
Meanwhile, exports of crude released from the US Strategic Petroleum Reserve also slowed sharply, averaging just 31,000 bpd in July, with cargoes heading only to France and Peru.
Recovery expected in coming months
Despite July’s sharp slowdown, analysts expect exports to recover in August and September as the Brent-WTI price gap widens again.
WTI traded at discounts of as much as $5.42 per barrel during July, restoring some of the price advantage that had previously supported robust US exports.
Market participants say export activity from the US Gulf Coast has already picked up.
Vortexa expects US crude exports to exceed 4 million bpd in both August and September, although volumes are unlikely to revisit the record levels above 5 million bpd recorded in April and May.
Energy Aspects forecasts exports at 4.58 million bpd in August and 4.45 million bpd in September.
Analysts also say geopolitical risks remain a key wildcard. Any renewed disruption in the West Asia could once again force buyers to seek alternative supplies from the United States, whose export capacity is estimated at around 6 million bpd, constrained mainly by pipeline infrastructure, shipping availability and loading schedules.
With inputs from agencies.
