Attacks by Iran-backed Houthi rebels on vessels in the Red Sea have led to transport disruptions for oil and other goods, but international oil shippers may have found a way to deal with the chaos.
The latest data from the Energy Information Administration offers a hint to that solution.
The report from the government agency showed surprisingly large weekly increases in gasoline and distillate supplies, contributing to losses for energy futures on Thursday.
But Robert Yawger, executive director for energy futures at Mizuho Securities USA, also highlighted another key figure in the data — a weekly jump in U.S. petroleum exports.
Exports climbed by 1.377 million barrels a day to 5.292 million barrels a day for the week ended Dec. 29, according to the EIA.
“For the first time since Houthi Yemeni rebels started to attack international shipping in the Red Sea, we are seeing a spike in U.S. exports,” said Yawger, in a Thursday afternoon note.
“Apparently, international shippers are worried about being attacked on the open sea, and are getting beat” on the cost of sailing around the Cape of Good Hope in South Africa as an alternative to the passage through the Red Sea, he said. Instead, the “safer and cheaper way to procure supply, especially for EU customers, is to sail the boat to the U.S. Gulf Coast and load up on cheap U.S. [oil] barrels.”
U.S. benchmark West Texas Intermediate crude
On Thursday, the February WTI futures contract settled at $72.19 a barrel on the New York Mercantile Exchange, while March Brent settled at $77.59 on ICE Futures Europe — a difference of $5.40 a barrel.
That compares with a “cost of carry” for an Amsterdam/Rotterdam/Antwerp refiner of around $4 a barrel, said Yawger. So “forget about the Houthis/Iranian menace in the Red Sea,” he said. “You don’t need a U.S. Navy escort from danger — just a nice, clean two- to- four-week round-trip journey to the U.S.”
“‘Ironically, the chaos in the Middle East is driving international crude-oil customers into the arms of the U.S. shale producers.’”
He expects U.S. petroleum exports to sustain the 5 million plus barrel-per-day level in the coming weeks, with the “geopolitical situation seemingly heating up every day.”
“Ironically, the chaos in the Middle East is driving international crude-oil customers into the arms of the U.S. shale producers,” said Yawger. “There is a very good chance U.S. exports break the all-time record in coming weeks, just in time for refiners to pull back on the run rate.”
Weekly U.S. crude-oil exports reached a record 5.629 million barrels a day in the week ended Feb. 24, 2023, based on EIA data going back to February 1991.