US Crude Exports Hit by Shipping Constraints

The US is experiencing a surge in crude oil exports due to high demand from overseas, particularly in Asia. The war in Iran has disrupted Middle East exports and caused buyers to look for alternative supplies. However, shipping constraints are limiting how much oil can be exported.

According to analysts, the system cannot sustain export levels of 10 million barrels a day, as often cited. Instead, a more realistic ceiling is around 6 million barrels a day. Exports are already approaching this range, with flows expected to reach 5 million barrels a day in April and top that in May.

The main logistical barrier is at the maritime export interface, where vessel availability and offshore loading are limiting exports. Freight costs for very large crude carriers (VLCCs) have surged, making it harder for exporters to compete. Additionally, lightering operations, which involve transferring cargo between tankers, have become increasingly expensive.

In the long term, capacity limits for pipelines, dock space, and loading logistics will also restrict export levels. Moreover, there are mismatches between US crude grades and international refiner requirements, making it harder to clear markets.