US crude exports could be staring at a ceiling pressurized by pricing reasons as well as hard physical limits, with total petroleum inventories in the country declining to multi-decade lows, trade intelligence firm Kpler said in a note on Wednesday.
"Exports hit a record [5.6 million barrels per day] sustainably last month, as the US sought to incrementally capture higher prices and help balance the market. But pipeline and dock constraints cap total US exports to this level, assuming an entire supply chain that works at full capacity with no hiccups," Kpler analysts said.
Only Enbridge's (ENB) Ingleside Energy Center and Gibson Energy's South Texas Gateway terminal, which load US crude onto tankers for export to Europe and Asia, have the capacity to directly load Very Large Crude Carriers, limiting the capacity of US to replace Middle Eastern supplies at scale.
About 16 million barrels of crude was withdrawn from US reserves last week, including from strategic petroleum reserves, with inventories at the Cushing hub falling to less than 22 million barrels.
The supply tightening at the Cushing hub, which saw a weekly draw of 583,000 barrels, has shifted from a tail risk to the baseline assumption, with implications expected to impact the entire WTI complex.
"Inventory draws have been in keen focus since the start of the US-Iran war. The US has pivoted to a net liquids exporter in this time, but the realities of sharp draws are pushing prompt structure higher and putting further pressure on critical inventories and domestic consumers," Kpler analysts said.
About 170 million barrels have been released so far from SPR as part of the temporary oil exchange program. Withdrawal from SPR remains a finite fix as reserves declined to 415 million barrels entering the crisis and is inadequate to compensate for the lost barrels due to the long-term closure of the Strait of Hormuz.
The payment required for these barrels in the form of 18-24% premium in kind is also expected to put significant pressure on oil inventories in 2027-2029.
Meanwhile, US imported 6.4 million b/d of crude last week, recording a weekly rise of 1 million b/d, while US refiners have recorded a 95% utilization rate despite a light maintenance season "further squeezing commercial stocks", Kpler said.
At the same time, wildfires in Canada, including within 20 kilometers of 500,000 b/d of oil sands production, present an immediate risk as a 300,000-500,000 b/d of supply disruption could "heavily stress PADD 2 refiners and push the situation at Cushing to critical levels," analysts said.