The Strait of Hormuz remains "slow to open," U.S. crude oil exports surge, becoming the "world's top exporter."
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The Hormuz Strait crisis continues to escalate. U.S. crude oil is flooding the global market at an unprecedented scale, but this supply buffer is quickly approaching its limit.
On May 4th, according to Bloomberg, over the past nine weeks, the U.S. has exported a total of more than 250 million barrels of crude oil overseas, surpassing Saudi Arabia and regaining its status as the world’s largest crude exporter. Asian buyers—from Japan, South Korea to Thailand and Australia—are turning to U.S. crude to fill gaps in Middle Eastern supply.
However, the surge in exports is rapidly depleting U.S. domestic inventories. In the past four weeks, combined U.S. crude and refined product inventories have fallen by 52 million barrels, dropping below historical averages. Energy experts warn that there is an actual upper limit to U.S. export capacity, as infrastructure and shipping bottlenecks constrain the sustained outflow of crude oil.
Meanwhile, the average U.S. retail gasoline price has surpassed $4.40 per gallon, more than a dollar higher than when the war broke out, and diesel prices have risen by nearly $2. Energy inflation pressure is spreading ahead of the November midterm elections.
Jay Singh, Head of Oil & Gas Research for Rystad Energy in the U.S., stated: "There is isolation—but not detachment—between the U.S. and the energy crisis sweeping the globe." As inventories continue to be depleted and export capacity approaches its ceiling, how long this barrier can hold has become the most urgent question for the global energy market.
The U.S. Surges to Become the World’s Largest Crude Exporter, But Export Capacity Nears Its Limit
The report says that the near-blockade of the Strait of Hormuz has completely reshaped global crude trade patterns. Large numbers of tankers, loaded at Alaska and the U.S. Gulf Coast, are heading for Japan, Thailand, and even Australia, making the U.S. the “last resort” for global energy consumers.
In Asia, this shift is particularly drastic. Before the war, about 90% of Japan’s crude and fuel supply came from the Middle East, and its purchases of U.S. crude were negligible. Now, according to sources, Japanese refiners have bought at least 8 million barrels of U.S. crude for August delivery in just the past few days. Refiners in Singapore and South Korea have also significantly increased their U.S. crude purchases. South Korea has long been the world’s second-largest buyer of U.S. crude, with demand remaining strong.
Despite the impressive export figures, industry insiders are growing increasingly concerned about sustainability. Traders point out that export infrastructure and shipping capacity at the U.S. Gulf Coast are becoming hard constraints.
Although the theoretical export peak is near 10 million barrels per day, the actual sustainable export cap may only be around 6 million barrels per day, with short-term surges possibly reaching 7 million. The main bottlenecks are the tight supply of ships, and the high-cost offshore transfer operations—transshipping oil between vessels—which will limit actual loaded volumes.
Meanwhile, U.S. domestic oil production has dropped by about 100,000 barrels per day since the outbreak of the Iran war. Drillers have largely remained on the sidelines despite surging oil prices because the direction of the market is hard to predict.
According to an anonymous survey of energy executives by the Dallas Fed in late April, one respondent bluntly stated: “The current administration’s unpredictability makes business modeling nearly impossible.”
Oil giants such as ExxonMobil and Chevron have also been affected in their Middle East operations. Chevron CEO Mike Wirth said last Friday that the global energy system is under “extreme pressure.” On the previous day, ConocoPhillips warned that a “severe shortage” of oil is imminent.
Accelerating Inventory Decline, Domestic Energy Inflation Heats Up
The price of surging exports is being paid by American consumers.
Total U.S. crude and refined product inventories have fallen for four consecutive weeks, dropping by 52 million barrels, below historical averages. TD Securities commodity strategist Ryan McKay expects the declining inventory trend to continue as the war persists, with weekly declines in May possibly reaching millions of barrels.
Domestic fuel prices are climbing accordingly. The average U.S. retail gasoline price has exceeded $4.40 per gallon, with diesel price increases approaching $2 per gallon. With the peak summer driving season approaching, fuel demand will rise further and price pressure is expected to persist.
Clayton Seigle, Senior Fellow at the Center for Strategic and International Studies in Washington, warns:
“Ships are coming to take our oil, but once large volumes leave the U.S., the supply-demand balance will inevitably tighten. By depleting stockpiles, we’re digging a hole for ourselves.”
Export Ban Debate Heats Up, Trump Administration Draws a Red Line
With domestic oil prices rising, bets on export restrictions are quietly growing in the market. Options market data shows traders are building protective positions, betting on a sharp reversal in U.S. exports.
Between July and November contracts, the size of put option positions already amounts to some 22 million barrels; these positions will profit if the WTI-Brent crude price spread hits $45 per barrel. Currently, the July WTI-Brent spread is about -$11.63 per barrel. Some traders are even betting on a Trump administration-imposed export ban.
However, the Trump administration has repeatedly and explicitly rejected any export restrictions. According to sources, government officials have reiterated this stance in private conversations with energy executives, even as some executives have raised warnings about possible restrictions. Energy Secretary Chris Wright recently reiterated that the U.S. will not stop energy exports: “We want to expand exports, not stop them.”
However, analysts believe that as oil prices rise further, political pressure may change this position. Kevin Book, Managing Director at ClearView Energy Partners, said:
“A bad idea rejected at $4 per gallon might be reconsidered at $6 per gallon.”
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