This month, U.S. crude exports to Europe have averaged a record-breaking 2.1 million barrels per day, driven by substantial discounts to the international benchmark and a decline in demand for oil by U.S. refineries.
Subscribe to our newsletter!
This month’s record exports to Europe and China show the United States’ growth in the crude oil market and confirm its role as Europe’s primary supplier after Russia invaded the Ukraine.
Twelve U.S. refineries experienced a holiday shutdown, which increased planned plant maintenance and decreased demand for crude oil, widening the difference between U.S. crude and benchmark Brent.
U.S. West Texas Intermediate oil prices were impacted by the slowdown in processing, while Brent prices were boosted by the diminishing supply of Russian barrels and issues with Norway’s Johan Sverdrup flows, according to Kpler analyst Matt Smith.
Since a bigger spread makes U.S. oil less expensive for overseas purchasers, the disparity between West Texas Intermediate and Brent grew to more than $7 at the end of January, the biggest discount thus far this year.
According to Kpler data, volumes of crude oil bound for Europe, carried aboard very large crude carriers (VLCC), which generally transport roughly 2 million barrels, were ready to establish a record this month.
According to Refinitiv Eikon data, the Advantage Virtue, a VLCC chartered by BP and loaded at Corpus Christi, Texas, on March 11, was en route to Britain and scheduled to discharge at the end of this month.
Refinitiv and Kpler ship tracking indicated that Front Alta, another VLCC hired by Occidental Petroleum, was en route to Rotterdam.
Occidental opted against commenting. In lieu of commenting on exports, BP cited its energy outlook, which predicted that US oil output would climb through the end of this decade before dropping and OPEC will compete to capture more market share.
Prices for some premium U.S. oil grades have benefited from export demand. In comparison to the previous quarter, the average price for WTI Midland, the top U.S. shale basin, has increased by almost 50% so far this year, while WTI in East Houston has increased by approximately 30%.
As long as the Brent-WTI spread stays broad, exports should stay strong in the coming months, according to Kpler’s Smith.
When the season of refinery turnarounds ends and summer driving ramps up in the upcoming months, domestic demand is expected to climb. Nevertheless, supply is also anticipated to rise. The supply of U.S. shale oil has increased, and the Biden administration is scheduled to release 26 million barrels of crude oil from the Strategic Petroleum Reserve with congressional approval.
