Analysis: EIA Sees Soaring Exports Break 7-Wk Build Streak

VIENNA (DTN) – Commercial U.S. crude oil inventories last week shrank for the first time in two months as exports soared to a seven-month high, Energy Information Administration data showed Wednesday (4/15).

The 900,000 bbl draw during the week ended April 10 left crude inventories at 463.8 million bbl. The prior seven-week climb marked a fast-paced spring stock building season that lasted longer than typical cycles, boosting inventories to 464.7 million bbl, their highest in more than three years.

U.S. crude inventories typically peak in late March or early April before shrinking until late August as refiners ramp up operations ahead of peak fuel demand season. This time, however, the weekly draw came on the back of a 2.1 million bpd swing in net imports. Crude exports clocked in at 5.2 million bpd, the highest weekly pace in seven months, while imports recorded the slowest week so far this year.

Millions of barrels of crude oil and oil products have been stranded in the Persian Gulf for more than six weeks amid the U.S.-Israeli war on Iran. This led to increased buying interest for U.S. petroleum as refiners and consumers globally scrambled to replace missing barrels. Last week, total petroleum exports soared by more than 1 million bpd to 12.74 million bpd, marking the highest weekly pace on record, EIA data revealed.

Refined product exports have over the past four weeks been running 1 million bpd, or 15%, above year-ago levels amid rocketing exports of distillate fuel oil, natural gas plant liquids and heavy oils, the very products most affected by the supply fallout caused by the de facto closure of the Strait of Hormuz. Crude oil exports have now followed suit with the typical four-to-six-week delay to a widening arbitrage window.

Last week, we wrote that “WTI’s steep discount to Brent in March likely led to a surge in cargo bookings, which will show up in export data in the next few weeks. This, in combination with high demand for refined products, may push total petroleum exports to new heights in the weeks to come”. While the Brent-WTI spread has since narrowed, with WTI even briefly flipping to a rare premium to Brent, exports are set to continue at a fast pace this month. Furthermore, the current disconnect between futures and spot pricing may paint a distorted picture for export expectations: WTI ex Houston is back to trading at its pre-war discount to dated North Sea crude.

Middle Eastern crude output will take months to recover to pre-war levels once the Strait is reopened. At the same time, higher prices are incentivizing new well drilling, meaning more and cheaper U.S. crude will be available six months from now. Until then, price-induced demand destruction may have dampened international demand for U.S. oil. For now, however, every sign points to exports staying elevated in the near future.