President Trump is promoting the U.S. Navy Blockade of the Strait of Hormuz An opportunity for U.S. oil and gas exporters. Tight supply is a bad sign for oil prices.
U.S. plans to seize control of the key waterway from Iran could cut off the roughly 2 million barrels of oil Iran continues to ship through the strait each day, much of it destined for China.
With 20% of the world’s daily supply of oil and liquefied natural gas already trapped behind the strait, Japan, South Korea and other Asian countries that rely on the Middle East are looking elsewhere to supplement their dwindling energy supplies. What this means for U.S. energy markets:
Will more countries turn to the United States for oil and gas purchases because of bottlenecks in the Middle East?
Yes. This weekend, Trump took to social media to praise an image of a map showing a conga line of ships sailing toward the United States. In another post, he said large numbers of empty tankers were heading to the United States, loaded with “the best, ‘sweetest’ oil (and gas) anywhere in the world.”
Market intelligence firm Kpler is tracking 70 supertankers, known as very large crude carriers (VLCCs), due to arrive at Gulf Coast ports in April and May. Last year, an average of 27 supertankers loaded U.S. crude oil per month.
Each ship can carry about 2 million barrels of oil. These large ocean-going vessels are designed for long-distance journeys, such as the 11,700-nautical-mile voyage between Houston and Singapore.
How much oil does the United States export?
According to Kpler, U.S. crude oil exports will reach a record 5 million barrels per day this month, and based on current tanker traffic, it is expected that another record may be reached in May.
The U.S. exported an average of 4 million barrels a day of crude last year, down from a record of about 4.6 million barrels set in February 2024, according to the Energy Information Administration. The United States also transports about 3 million barrels of gasoline, jet fuel and diesel every day.
Although the United States is the world’s largest crude oil producer, it still imports oil (mainly from Canada and Mexico) for refineries to process heavy crude oil. Imports averaged 6.2 million barrels per day last year, according to EIA data.
Does the United States have the ability to send more supplies overseas?
The answer is complicated. The United States produces about 13 million barrels of oil per day, but much of that supply is already used.
The four largest U.S. oil export facilities in Texas and Louisiana have a little wiggle room to fill more tankers each month, but not much. Unlike the LNG market, which is largely underpinned by 20-year contracts, oil shipments are primarily arranged in the spot market. That means U.S. oil exports are capped by the physical limitations of the country’s ports, which have been approaching their maximum capacity in recent years.
The United States has been working hard to increase its export capabilities. Enbridge is expanding its Ingleside terminal in South Texas to store an additional 2.5 million barrels of crude oil. The Port of Corpus Christi, the country’s main oil export hub, completed a $625 million expansion last year to deepen and widen its shipping lanes.
A new terminal for cooling and exporting liquefied natural gas just opened on the Gulf Coast. The Golden Pass plant, jointly owned by ExxonMobil and Qatar Energy, will eventually produce about 18 million tons of LNG per year, meeting much-needed LNG supplies. Cheniere Energy, another natural gas exporter, said it was considering postponing maintenance on some units to produce more supply.
Other projects have also encountered regulatory and market obstacles. During the first Trump administration, Phillips 66, Enterprise Product Partners and others proposed building giant deepwater crude export terminals along the Gulf Coast to refuel tankers faster. In some cases, licensing challenges ensue. In other areas, buyers failed to show up in large numbers.
What does this mean for the U.S. economy?
Simply put, if the U.S. exports more oil and natural gas and depletes its inventories, oil prices will continue to rise.
The national average price for regular gasoline was $4.13 on Monday, down 3 cents from last week but $1.15 higher than when the war began, according to AAA. Trump’s announcement of a blockade over the weekend caused oil prices to rise again – U.S. crude oil rose 2.6% to $99.08 a barrel on Monday.
The surge in exports has yet to be matched by an increase in U.S. oil production. In fact, shale oil producers have been reluctant to add new drilling rigs because they do not believe that rising prices can be sustained. That means inventories of oil and other petroleum products could fall, causing prices to rise again.
Energy producers are scrambling to figure out how high prices can go before buyers start cutting production, a phenomenon known as demand destruction. Continued rises in energy prices could trigger a recession, hurting demand. EIA data shows that U.S. gasoline demand last week fell by about 100,000 barrels per day, or 1.4%, from the previous week.
“It could be a win for U.S. exporters who charge loading fees and traders who might make money selling the oil,” said Andy Lipow, president of Lipow Oil Associates in Houston. “But I don’t think consumers feel like it’s a win for them in the face of higher prices.”
Write to Colin Eaton: collin.eaton@wsj.com with Benoit Morena in benoit.morenne@wsj.com
