US oil market support might be waning

The oil market has proved remarkably resilient since the outbreak of the war in the Middle East given that maritime traffic through the Strait of Hormuz has been minimal for months.

Brent crude futures are at about $85 per barrel, well above their pre-war level but down about 25% from the early May peak.

According to ANZ commodity strategists, the main levers the oil market has pulled to withstand the supply disruption have been:

1. China cutting imports
2. Saudi Arabia's utilisation of the East-West pipeline to bypass Hormuz
3. Global stockpile releases

But there is one more lever that has also been doing the heavy lifting to keep oil markets supplied.

"Not as well known has been the support that the U.S. has provided," ANZ notes.

"This has come in the form of exports, particularly of petroleum products in recent months."

Export volumes rose to 8.1 million barrels per day in early May, after averaging about 6.9 million bpd before the war, but have now started to slow.

ANZ notes that total U.S. exports of crude and petroleum products are down by roughly 1.5 million bpd since June.

"U.S. supply has become a larger concern," ANZ says.

"Crude production and drilling activity weakened, while total oil exports have fallen from recent highs, reducing the ability of non-OPEC producers to offset Middle East losses."