In the LOOP: US crude exports in a lull following record-breaking summer

US crude oil exports let up in recent weeks after reaching a record-breaking 3 million b/d in June, federal data show.

Some 1.2 million b/d of crude oil was exported by the US in the week that ended August 17, according to the US Energy Information Administration. The US has not loaded less barrels for export since the week ended January 5.

While that is a relatively low level in 2018 terms, it is a more than 23% increase from the same week in 2017, when 936,000 b/d was exported.

Traders say several factors are contributing to the recent drop in US exports. A narrowing spread between Brent and WTI during much of July, a strengthening dollar, trade tensions between the US and China and increased domestic demand have all contributed to fewer cargoes loading for export, they say.

"Some deals are getting done," one US crude broker said. "Just not as many."

US crude market sources say the export market has been rather quiet in recent weeks and report that "the arbitrage closed."

The front-month Brent-WTI swaps spread, an indicator of US crudes' competitiveness on the global market, narrowed sharply after reaching what were very wide levels historically in June.

The 30-day rolling average of the Brent-WTI swaps spread was $6.35/b Monday, compared with an average $7.95/b spread during the previous 30 days.

As a result, fewer US crude barrels are being loaded for export at the moment, sources said. But that can change quickly.

China, which is one of the biggest buyers of US crude, recently hit the pause button on taking crudes such as West Texas Intermediate, Eagle Ford and Domestic Sweet Blend.

China's top buyer, Unipec, purchased nearly 16 million barrels of light sweet US crude in June, but threats of tariffs on crude dropped Chinese buying to nearly zero in July and are expected to decline through August.

Recent reports that Unipec will continue to source US crude despite trade tensions may impact prices this fall, traders said. Several sources said that Chinese buying of US grades will start to resume in October.

"They are itching to get back in," one US crude trader said.

Others in the market have seemed to be taking a wait-and-see attitude regarding increased buying from China.

"[There are] lots of rumors around," one Gulf Coast crude broker said. "I guess it will be something to keep an eye on."