U.S. crude oil shipments abroad decreased to 3.66 million barrels per day (bpd) in July, the weakest monthly total in eight months, according to ship tracking data. The fall followed a short-lived memorandum of understanding reached between Washington and Tehran in June that temporarily eased transit risks through the Strait of Hormuz and released additional Middle Eastern barrels into international markets, reducing appetite for U.S. crude.
Earlier this year the United States rose to the top of the world export rankings after disruptions tied to the Iran war removed a swath of Middle Eastern supply and sent Asian and European buyers toward American barrels. U.S. exports hit a monthly record of 5.7 million bpd in May, but volumes have declined each month since that peak.
Regional trade patterns shifted sharply in July. The share of U.S. exports sent to Asia slipped to roughly 40% in July from 52% in June. Japan and South Korea, among the largest recipients of U.S. crude, took significantly fewer shipments. Cargoes to Japan fell 67% to 324,000 bpd in July from their peak in May, while shipments to South Korea dropped 39% to 474,000 bpd. Exports to Europe also eased, reaching about 1.7 million bpd in July compared with as much as 2.5 million bpd in May.
The June agreement temporarily allowed previously delayed tankers to transit the Strait of Hormuz with greater certainty. The number of tankers exiting the strait in a single day reached a high of 42 during that period, increasing available crude supply from the region and weighing on demand for U.S. barrels.
Strategic Petroleum Reserve shipments and refinery activity. Releases from the U.S. Strategic Petroleum Reserve (SPR) slowed in July, totaling just 31,000 bpd. Kpler data showed the two SPR shipments that moved in July were bound for France and Peru.
High domestic refinery utilization also kept barrels inside the United States rather than heading overseas. Rohit Rathod, an analyst at Vortexa, said elevated runs were a factor keeping exports down. U.S. Energy Information Administration data show the four-week average refinery utilization rate sat at about 96.3% in July, the highest since 2018, with crude input to U.S. refineries at levels not seen in roughly seven years.
Pricing spreads and near-term export drivers. The relative price of U.S. West Texas Intermediate (WTI) versus global Brent benchmark crude also affected trade flows. In June, when deals for July shipments are commonly negotiated, WTI's discount to Brent narrowed significantly, averaging $4.17 per barrel compared with a discount of $8.16 in May. Because most U.S. grades are priced as differentials to WTI, a smaller WTI-Brent discount erodes the price incentive for exports when U.S. crude becomes relatively less attractive.
However, the spread widened again more recently, with WTI trading at discounts of as much as $5.42 in July. Analysts say that should support higher exports in August and September. Ship fixtures out of the U.S. Gulf Coast have been particularly active in the past few days, with an unusually large number of Very Large Crude Carriers (VLCCs) fixed to Asia and Europe and Aframax tankers also booked, according to Scott Shelton, an energy specialist at TP ICAP. For context provided by market participants, a VLCC can move up to 2 million barrels while an Aframax carries about 750,000 barrels.
"U.S. exports are clearly on their way up for crude," Shelton said, reflecting the recent surge in fixtures.
Forecasts and capacity limits. Market analysts expect export volumes to rebound in the coming months. Vortexa's Rathod projects exports in August and September will exceed 4 million bpd, though he noted they are unlikely to return to the more than 5 million bpd seen in April and May. Research and consultancy firm Energy Aspects anticipated exports near 4.58 million bpd in August and 4.45 million bpd in September.
Traders and analysts estimate that U.S. monthly export capacity is about 6 million bpd, with practical constraints including pipeline capacity, vessel availability and loading schedules affecting how much can be shipped in any given month.
Market participants also pointed to geopolitical risk as a potential trigger for renewed reliance on U.S. exports. Ben Cook, portfolio manager of the Hennessy Energy Transition Fund, said the United States could be called upon to supply additional barrels if conflict in the Middle East escalates.
The interplay of short-term geopolitical developments, domestic refinery activity, and international price relationships shaped the downturn in July exports. While seasoning in the market and the widening of the WTI-Brent spread point to increasing outbound cargoes in the near term, capacity constraints and evolving regional demand patterns will determine how quickly volumes recover to the highs recorded earlier in the year.