Falling Tanker Rates Raise Export Outlook for US Oil
Prices Rise, Especially for Light Sweet Barrels
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Falling tanker rates are improving the export outlook for U.S. crude, and prices for light sweet barrels, in particular, are getting a lift.
The differentials for WTI MEH and WTI Midland against benchmark U.S. futures have firmed up this week thanks to the drop in freight costs. The flagship oil grades are also outperforming a variety known as sour crude. U.S. medium sour Mars Blend is more similar to the sulfur-rich barrels produced in Venezuela, and Mars has remained under pressure as the U.S. has said it’s alreadymarketingsome of the South American country’s supply.
WTI MEH and WTI Midland have reached their strongest levels in about two weeks.
Freight costs have dropped sharply and the cheaper shipping environment is encouraging U.S. crude to move offshore, supporting physical crude prices and easing concerns around builds for domestic stockpiles.
“The shipping markets are freeing up and rates are tanking from the U.S. to Asia, and the U.K. to Asia,” said Scott Shelton, an energy specialist at TP ICAP group Plc. “That’s supporting the U.S. crude market.
Total U.S. petroleum stockpiles, excluding strategic reserves, have climbed to the highest since July 2024, data from the Energy Information Administration showed on Jan. 7. Those builds were driven mostly by a second consecutive week of nationwide oil builds. Shelton said that WTI MEH’s rally this week indicates that barrels are moving out of the U.S. and the recent inventory increases will soon be reversed.
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