With the Middle East war shaking global crude oil supply and demand, the Port of Corpus Christi in Texas is recording unprecedented throughput.
Even before the war, the port was the world's No. 3 crude export hub after Saudi Arabia's Ras Tanura and Iraq's Basra, but its role has grown as major Middle Eastern export ports have effectively lost function due to the Strait of Hormuz being blocked.
According to market research firm Kpler on the 4th, U.S. crude exports averaged 5.2 million barrels per day in April, more than 30% higher than 3.9 million barrels per day in February before the war. The Port of Corpus Christi handles about half of that.
According to the port operator, ship calls in March topped 240, far above the usual roughly 200. Very large crude carriers (VLCCs) were also at the level of 50–60 a day, nearly double from a year earlier. The port told CNBC it is "a situation where tankers are coming and going nonstop."
This surge in demand is tied to shifts in Asia. As the Strait of Hormuz has been effectively closed, Asian countries that had relied on Middle Eastern crude turned to U.S. oil. Matt Smith, an analyst at Kpler, said, "The Asian market is buying whatever volumes it can secure," adding, "Demand for U.S. light sweet crude in particular has surged."
However, the dominant view is that this trend is unlikely to last in the long run. The biggest reason is the difference in crude characteristics. U.S. light crude is low in sulfur and lighter, while Middle Eastern crude is relatively heavier and higher in sulfur, a "heavy crude." Many Asian refineries are optimized to process heavy crude, making U.S. oil a difficult full substitute.
Logistics infrastructure is also a constraint. For now, the effective cap on U.S. crude exports is cited as the low 5 million barrels per day. Corpus Christi's handling capacity is likewise limited to about 2.6 million barrels per day due to pipeline constraints. The port sees room to expand by an additional roughly 500,000 barrels per day if pipelines are expanded.
Crude from Latin America or West Africa can play a partial substitute role, but some say it falls short of filling the Middle East gap. Before the war, about 20% of global crude flows passed through the Strait of Hormuz.
Smith said, "The gap in Middle Eastern supply is not of a scale that can be fully replaced by other regions," adding, "In the end, stabilizing the strait and normalizing Middle Eastern supply is the only solution."