Crude oil exports from the United States to Europe are anticipated to decrease next month, following a narrowing price gap between West Texas Intermediate (WTI) and Brent crude, citing industry analysts.
In November, U.S. oil exports to Europe reached a record high of 771,000 barrels per day. However, the price difference between WTI and Brent has recently contracted, with the gap shrinking to $3.40 per barrel in the past few days, the smallest spread since October of last year. Mizuho’s director of energy futures, Bob Yawger, noted that a discount of $4 per barrel is generally considered the threshold that determines whether export volumes remain strong or decline.
The narrowing spread between the two benchmarks is attributed to several factors. One key reason is the continued drawdown of U.S. strategic crude oil inventories at Cushing, Oklahoma, which have now fallen to 23 million barrels—marking the lowest mid-December levels since 2007. Additionally, an increase in freight rates has contributed to the shift.
However, it has raised concerns over the strength of the tanker market, issuing warnings in recent weeks that the market is weaker than usual for this time of year. The first warning, issued in early November, noted that winter tanker rates had not yet spiked as expected. A subsequent report earlier this month highlighted a slump in rates for several commodity carriers, including LNG and Very Large Crude Carriers (VLCCs), contrary to seasonal trends.
The rise in U.S. freight rates for tankers headed to Europe is linked to higher U.S. oil prices, rather than a tighter tanker market, underscoring the fragile nature of European demand for U.S. crude.