Record U.S. crude output, LNG exports, and fuel shipments are absorbing much of the global supply shock from the closed Strait of Hormuz, the American Petroleum Institute said this week. The effort has pushed domestic crude and fuel inventories below their five-year average, while the national average gasoline price has climbed to $4 a gallon amid the international crude price surge.
Record U.S. oil and gas output is absorbing much of the shock from the closed Strait of Hormuz, but the effort is straining supply at home. WTI crude traded at $78.18 a barrel, up 1.15%. Record American production and rising LNG exports continue to offset lost Middle East barrels, the American Petroleum Institute (API) said in an analysis published this week.
Decades of investment built the buffer
Since the shale revolution began, the U.S. oil and natural gas industry has invested about $150 billion a year in upstream production, plus additional billions in pipelines and export terminals, according to API's estimates. Those investments, the group said, changed America's role in global energy markets, giving refiners and importers elsewhere an alternative supply after Hormuz shut to shipping traffic.
Domestic inventories slide below average
But the record exports are draining supply at home even as refineries run at high utilization. Middle distillate inventories are now 12% below the five-year average, according to the latest EIA petroleum status report. That tightens the domestic supply and demand balance, leaving less room for error if a hurricane or refinery outage hits.
Gasoline climbs at the pump
The national average gasoline price is now $4 a gallon, about $1 higher than at the end of February and nearly $0.90 higher than a year earlier, before the U.S. and Israel began bombing Iran. According to API, "energy security is built through investments made over many years".
The path to a lasting de-escalation in the Middle East remains unclear. The API said the U.S. system will keep offsetting some, but not all, of the Middle East supply that isn't reaching buyers these days.
Source: Oilprice.com
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