By Barani Krishnan
Investing.com -- Nearly one day’s U.S. production — that’s what total oil exports out of the United States for last week were, reaching a record of 11.1 million barrels, government data on Wednesday showed.
But crude prices, meanwhile, extended their rally for a fifth day out of six. Global benchmark Brent clung to above $100 per barrel although the market did struggle most of the session as traders agonized over the potential for another outsized U.S. rate hike in September and the likelihood that a fledgling recession noted in the United States over the first two quarters of this year could deepen, and affect Europe and the rest of the world.
Equally, at the top of oil traders’ minds, was the additional supply that would come onto the market if Iran gets a renewed nuclear deal with global powers that would remove U.S. sanctions on its oil, allowing its legitimate return to the export market for crude.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, was up $1.15, or 1.2%, at $94.89 per barrel. WTI has rallied with few stops since hitting a near six-month low of $85.73 on Aug. 16.
London-traded Brent settled up $1, or 1%, at $101.22. The global crude benchmark has rallied since hitting a low of $91.71 six days ago. Recession fears aside, one reason for Brent’s relative underperformance against WTI on Wednesday was the superior export performance of U.S. crude versus global competing oils, said traders.
“At the rate the U.S. is exporting oil, Saudi Arabia and the rest of OPEC should be worried for their market share,” said John Kilduff, partner at New York-based energy hedge fund Again Capital.
“The U.S. is nearing one day’s production of oil for the combined crude and products’ exports it is doing,” Kilduff observed. “Erosion of market share was what led the Saudis to ramp up production before the pandemic, to try and kill U.S. shale [oil]. Although U.S. crude production remains below pre-pandemic highs, these sort of export numbers will raise Saudi eyebrows for sure. They won’t like this one bit, I can tell you.”
The United States exported 4.177 million barrels of crude during the week ended Aug. 19, after a record 5 million barrels in the previous week to Aug. 12, the Washington-based Energy Information Administration, or EIA, reported in its Weekly Petroleum Status Report.
In addition to the crude exports, there were 6.899 million barrels of gasoline shipments and 2.370 million barrels of other oils that made it for overseas sales last week. The total, of 11.076 million, overwrote last week’s grand oil sales of 10.709 million.
In terms of crude production, the United States put out 12 million barrels per day last week, the EIA reported. Crude oil inventories, after all exports and domestic consumption, fell last week by 3.282 million, extending the previous week’s drop of 7.056 million.
The drop in the crude balance was helped by an outsized release of 8.1 million barrels from the U.S. Strategic Petroleum Reserve, or SPR, which the Biden administration has been tapping to ensure adequate supply for refiners to turn into gasoline that would reduce pump prices of the fuel.
With last week’s drawdown, the SPR’s total holding of emergency crude now stood at its lowest levels since January 1985, the EIA said. The prize for that has been the continuous drop in pump prices of gasoline since the start of summer, on June 20. On Wednesday, the retail price of gasoline averaged $3.883 per gallon compared with the mid-June record high of $5.01.
Inventories of gasoline, America’s number one fuel product, fell by 27,000 barrels last week, adding to the previous week’s drop of 4.642 million.
Stockpiles of distillates — the oil variant required for making the diesel needed for trucks, buses and trains, as well as the fuel for jets — fell by 661,000 barrels last week, offsetting the previous week’s build of 766,000.
On the Iran nuclear deal, the United States has sent its response to the European Union on a proposal to salvage the agreement originally inked in 2015, the State Department announced Wednesday.
"As you know, we received Iran's comments on the EU's proposed final text through the EU. Our review of those comments has now concluded. We have responded to the EU today," State Department spokesperson Ned Price said in a statement.
He did not provide details on the response. But CNN reported that “it is not expected that the U.S. will accept what Iran put forward without seeking changes and further negotiations”.
Iran also confirmed that it had received the U.S. response.
"The careful study of the views of the American side has started and Iran will share its comments with the coordinator upon completion of the review," said a spokesman for Iranian Foreign Minister Nasser Kanaani.
The nuclear deal, officially known as the Joint Comprehensive Plan of Action, is critical to ending U.S. sanctions on Iranian oil exports and allowing Tehran's legitimate return to the export market for oil.
Talks between Iran and global powers, led by the EU, have dragged on for 20 months since President Joe Biden entered office. Biden’s predecessor Donald Trump was the one who canceled the 2015 agreement in 2018, putting sanctions on Iran.
In recent weeks, Iran has made several concessions to try and get the deal revived.
On Monday, it dropped its demand for the lifting of the terrorism designation that had been placed on the IRGC, or the Islamic Revolutionary Guard Corps The IRGC is Tehran’s elite security force, blamed for many terror acts around the world. Iran dropped its demand that the U.S. stop listing the IRGC as a terrorist organization under the State Department’s watchlist. That demand has been one of Iran’s sticking points that have held up the reinstatement of the 2015 nuclear deal.
On Tuesday, Iran went another step, giving up the block it had placed on the inspection of sites in Iran believed to be linked to uranium enrichment. Tehran had previously wanted the International Atomic Energy Agency to close its investigation of undeclared nuclear material found at certain Iranian sites in 2019. Now, it was no longer making that demand, a senior official of the Biden administration told CNN on Tuesday.
Effectively what that meant is that Iran had less to hide from the IAEA amid accusations that the Islamic Republic had amassed enough capacity, including uranium enrichment, at those sites to build an atomic bomb. For the record, Tehran has maintained that its nuclear program was for civil uses like power generation and not for making weapons. Saudi Arabia, Israel and other arch rivals of the Islamic Republic, of course, do not buy that story.