JEF Jefferies Financial Group Inc

By Ryan Dezember 

U.S. crude exports are surging, reflecting strife along the Strait of Hormuz that has given oil buyers second thoughts about the Persian Gulf.

The hostilities, including attacks on oil tankers passing through the important supply route, have lifted crude prices, sent tanker rates surging and opened a window for U.S. producers to sell more barrels abroad, taking market share from the Organization of the Petroleum Exporting Countries in the process.

RBC Capital Markets forecasts that 21 very large crude carriers, or VLCCs, will be loaded this month along the U.S. Gulf Coast, well above the monthly average this year of 13 ships and the record of 17 reached in March.

The average day rate for modern VLCCs, used to ship crude and petroleum products, has risen 69% to $30,759 since tensions flared in the strait earlier this month, according to Jefferies Financial Group Inc.

West Texas Intermediate futures for August deliver gained 0.8% to $57.90 a barrel Monday on the New York Mercantile Exchange, a three-week high. Brent crude, the global benchmark, declined 0.5% to $64.86 a barrel on London's ICE Futures exchange.

The $6.96 difference between the two prices is the slimmest it has been since April.

The spread is even narrower between Brent and a widely cited price set in Houston, though at a few dollars it remains enough to entice buyers to make the trip to U.S. waters, said RBC analyst Michael Tran.

"If you don't have to buy a barrel that comes through the Strait of Hormuz you're certainly inclined to do so," Mr. Tran said. "Security of supply is a huge topic."

President Trump weighed in on Monday, calling for countries that are dependent on Middle Eastern oil to ensure safe passage of their own vessels. He specified China and Japan.

"All of these countries should be protecting their own ships on what has always been...a dangerous journey," the president wrote on Twitter on Monday morning. "We don't even need to be there in that the U.S. has just become (by far) the largest producer of Energy anywhere in the world!"

Mr. Trump's administration has blamed Iran for the tanker attacks. Iran has denied involvement but the country's Revolutionary Guard has claimed responsibility for shooting down a U.S. drone last week. That claim came hours after a Saudi desalination plant was struck by a missile that appeared to come from Yemen.

Mr. Trump declined to launch retaliatory attacks on Iran and instead has said his administration will tighten economic sanctions on the country, which have been aimed at choking off Iranian oil exports. Iran, meanwhile, has threatened to shut down the strait if sanctions aren't lifted.

The equivalent of 21% of the petroleum liquids consumed globally in 2018 passed through the strait, according to the U.S. Energy Information Administration. Increasingly, those ships are bound somewhere besides the U.S., which has been producing crude in record volume and gaining global market share as sanctions take barrels from Venezuela and Iran off the market.

EIA data released last week showed U.S. crude exports on the rise, pushing to 3.4 million barrels a day during the week ended June 14. The record, set in mid February, is 3.6 million barrels a day. At the same time, imports from OPEC members are at a 30-year low.

Those factors, along with a weakening dollar and strong demand from U.S. drivers, have traders reversing what had been a bearish outlook on oil prices heading into a summit between OPEC and its allies, which is expected to take place later this month in Vienna.

"Oil traders will be hard pressed to push short bets in light of the possibility of meaningful Persian Gulf supply disruptions, unless they truly see tensions moderate significantly," said Pearce Hammond, an analyst with Simmons Energy.

Write to Ryan Dezember at ryan.dezember@wsj.com

(END) Dow Jones Newswires

June 24, 2019 15:43 ET (19:43 GMT)

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