CERAWEEK: US crude export system nears capacity as Asia demand surges

The US crude export system is approaching its physical capacity limits as a widening US discount to international benchmarks is driving increased flows to Asia following the closure of the Strait of Hormuz, experts said March 23 at CERAWeek by S&P Global Energy.

WTI crude is trading at a $12-$15/barrel discount to Brent and an even wider discount to Asian prices, creating what Karim Fawaz, director of global refining and products markets at S&P Global Energy CERA, described as a "very wide arbitrage window" for US crude exports to Asia. The discount is sufficient to cover elevated freight costs.

"Over the next few weeks, we're likely to see the export system of the US push toward physical limits in terms of the maximum export volumes we're able to accommodate," Fawaz said.

The most recent Federal Energy Regulatory Commission pipeline data showed flows from the Permian to the USGC narrowing significantly in the last year. Broadly, Permian-to-Houston crude flows were at 89% utilization during Q3 2025 with just 301,174 barrel/day of spare capacity.

The 275,000 b/d Longhorn pipeline, for example, recorded 268,891 b/d of crude flows in Q3 versus 274,036 b/d in Q4 2025.

The 400,000 b/d Bridgetex pipeline recorded 393,349 b/d crude flows during the third quarter versus 410,815 b/d in Q4 2025.

The surge in US exports comes as the Strait of Hormuz remains effectively closed, with daily vessel movements dropping from an average of 135 to fewer than 10. Around 200 loaded tankers carrying 125 million barrels are stuck inside the strait, creating unprecedented supply disruptions in global oil markets, CERA analysts said on March 23.

Latest data from Platts shows 38 crude fixtures booked between the USGC and Southeast Asia destinations in March so far, compared to just 13 in February.

It is worth noting that 23 fixtures have been booked to European destinations March to date, compared to 31 fixed in February.

Asian demand surge

Asia has emerged as the primary destination for redirected crude and product flows, acting as a "sink" for available volumes throughout the global system. The region is drawing not only US Gulf Coast crude but also refined products from the US Atlantic Coast.

The shift in trade patterns has been amplified by China's halt in refined product exports. China exported around 700,000 b/d of gasoline, diesel and jet fuel last year, but those flows have stopped since the crisis began, further tightening Asian markets.

Despite concerns about infrastructure constraints, no physical bottlenecks at US loading or receiving terminals have emerged so far. The USGC maintains substantial storage capacity and operational flexibility to handle increased export volumes.

In an oil shock scenario where Hormuz remains severely impeded for two to three months, crude prices could reach $180-$200/b before demand destruction forces market rebalancing, according to the analysts. Prices would likely remain above $100/b through year-end 2026 in such a scenario.

US supply outlook

Bannockburn Capital Markets Analyst Darrell Fletcher notes that roughly 10 million b/d is offline due to flow interruptions through the strait.

While disruptions have spurred demand and lifted prices, the supply outlook remains uncertain as US producers are caught between a potential looming deficit should shipping through the strait remain disrupted.

Higher prices could inspire some incremental US supply growth, according to Rebecca Babin, senior equity trader for CIBC Private Wealth, but it's limited to a few hundred thousand b/d.

"The US is already operating near the top end of its export capacity, so logistics, not just supply, become the limiting factor from here," she said. "Prolonged disruption could push the market into deficit, while a quick resolution still leaves us in a much tighter surplus."

But according to Phil Flynn, analyst at Price Futures Group, war premiums have created the exact environment producers could "lock in economics and ease off the brakes."

He cited capital discipline in the last two years as drivers for steady oil growth in the US, which is hovering close to the 13.6 million b/d record set in 2025.

"So, what do I think could realistically happen now? I expect a measured ramp-up, not a boom like we saw in 2014," he said. "I recognize there's a lag between drilling decisions, completions, and the first oil -- usually about 3 to 6 months or more -- but with sustained WTI prices of $70-$90/b or more, I believe we'll see more hedging, more completions, and a gradual rebuild in rig counts."

If the war premium stays priced in, Flynn expects a 200,000-400,000 b/d increase in production by late 2026 to early 2027, which should help meet the export surge without requiring massive new infrastructure, he said.

"We could see US oil producers produce more oil even if prices go down, if they lock in these current prices, so we believe that this is actually going to create a supply surge," he added.