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US fuel exports have surged to a record level as Europe and Asia lean on American energy supplies to make up for the shortfalls caused by the war in Iran.
More than 8.2mn barrels a day of refined fuels including gasoline, diesel and jet fuel were shipped from the US overseas last week, an increase of more than 20 per cent on the same period last year, according to the latest data from the US Energy Information Administration.
The surge in overseas purchases is contributing to a windfall for US energy companies, who may earn an additional $60bn of cash flow this year if prices remain elevated.
But it also risks a political backlash for President Donald Trump as domestic pump prices rise, with the average price of petrol reaching a four-year high of $4.53 a gallon.
While the White House has repeatedly insisted it will not ban exports of fuel, which have become a key lifeline for European and Asian economies, energy analysts believe domestic political pressure may force a rethink.
“This is getting ugly for the administration,” said Robert Yawger, a commodity specialist at Mizuho Securities. “If gasoline gets to $5 they may have to pull the export ban card out.”
Jeff Currie, a senior adviser on energy to private equity firm Carlyle, said the scale of the exports meant US inventories of oil were falling fast to keep up with demand from overseas. Diesel inventories in the US are at their lowest level in 20 years.
“A shortage doesn’t begin when supply stops,” said Currie. “It begins when inventories run out.”
Last week, huge demand for US energy saw America become a net exporter of crude oil for the first time since the second world war, a sharp reversal of the US position little over a decade ago when it was one of the world’s largest importers of crude.
The US-Israel war with Iran has in effect shut the Strait of Hormuz for the last two months, cutting off around a fifth of global oil supplies and triggering the largest ever oil supply disruption.
Oil prices whipsawed on Wednesday, with benchmark Brent crude swinging from as high as $109 a barrel to as low as $97 at one point, after Donald Trump suggested that the US military campaign would end soon and the strait would be “open to all”.
Oil traders have sold sharply on previous hints of a peace deal, in case the 100mn barrels of crude that are currently trapped inside the Gulf are released on to the market.
But the US president also warned that if the Islamic republic does not agree to a deal, the “bombing starts, and it will be, sadly, at a much higher level and intensity than it was before”.
Brent crude then rose back to $101 a barrel. Iranian officials said they were reviewing the latest US proposal, but tempered any expectations of a breakthrough that would end the conflict.
Iran’s Tasnim news agency, which is affiliated to the powerful Revolutionary Guards, said the proposal contained some “unacceptable provisions”.
Trump has repeatedly talked up the progress of back-channel negotiations between the US and Iran and the prospects of a deal to end the war.
Yet there have been few signs of momentum as mediators have struggled to narrow huge gaps between the warring parties over efforts to secure an agreement on the republic’s nuclear programme.
The fall in oil prices came after Axios reported that the US had sent Iran a one-page document through Pakistani mediators, which would include Tehran agreeing to a moratorium on its nuclear enrichment in return for sanctions relief and the unblocking of its funds held overseas.
Those issues have been at the core of the negotiations — the gaps between the parties — since the US and Iran held high-level talks in Islamabad almost a month ago.
The Trump administration demanded a 20-year moratorium on enrichment, while Iran said it would accept three to five years.
An Iranian diplomat told the FT that the latest US proposal includes a 30-day “confidence-building” period during which there would be a “simultaneous” opening of the strait and lifting of the blockade, which would be followed by more detailed discussions on the nuclear programme.
Iran has previously insisted that it would not resume negotiations until the US lifts its blockade of Iranian ports.
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