The U.S. has exported about 250 million barrels of oil over the past nine weeks, taking advantage of supply disruptions from the Middle East, according to Oil Capital. Daily exports reached a record 6.44 million barrels in the week ended April 24, according to the U.S. Department of Energy.
The increase in U.S. supplies coincided with the restriction of exports from the Persian Gulf countries after the closure of the Strait of Hormuz, one of the key routes for global oil trade. As a result, importers began to quickly reorient to alternative sources of raw materials.
Saudi Arabia, the largest oil exporter in the region, had to redirect flows through the Red Sea infrastructure. The main alternative has become the East-West pipeline, through which oil is transported to the port of Yanbu. However, some of the volumes are consumed domestically and export capacity remains limited. As a result, the kingdom’s supply has been reduced to about 5 million bpd compared to more than 7 million before the crisis.
Growth constraints in the US
Despite record export volumes, the U.S. oil industry faces domestic constraints. Commercial oil and fuel inventories declined for the fourth consecutive week and fell below multi-year averages.
An additional factor remains the state of the Strategic Petroleum Reserve (SPR), which by the end of April amounted to about 398 million barrels with a design capacity of over 700 million. This limits the ability of the US to smooth out domestic price fluctuations.
Logistics is also a constraint. Theoretically, the export potential is estimated at up to 10 million barrels per day, but the actual capacity is limited by infrastructure and tanker fleet – at the level of 6-7 million barrels.
Impact on the domestic market
Increased exports and lower inventories coincided with higher global oil prices, which has already had an impact on the cost of fuel inside the US. According to the American Automobile Association, the average price of gasoline reached $4.18 per gallon, up about 40% since late February.
The situation emphasizes the dual effect of the current conjuncture: on the one hand, the U.S. is strengthening its position in the global market, while on the other hand, it is facing rising domestic prices and resource base constraints.
It is worth recalling that crude oil exports from the US were banned for several decades and were fully liberalized only in 2015. The Strategic Reserve was created after the oil crisis of the 1970s as a tool to protect the domestic market, but in the current environment its role is increasingly seen in the context of managing global price and political risks.
In this context, the redistribution of oil flows due to the crisis in the Strait of Hormuz has strengthened the U.S. role in the global market, but at the same time revealed the limitations of U.S. infrastructure and risks to the domestic fuel market.
