North America Crude Markets short-term outlook: September 2022

Pervasive backwardation in the Brent term structure largely collapsed in August on sufficient near-term sweet crude availability in the Atlantic basin, causing Brent/WTI differentials to tighten. Despite the relative recovery of WTI, US exports shattered previous records in August, topping 3.8 million b/d. Record volumes to Europe continued driving the export boom. European refinery demand for US barrels is expected to remain strong with the EU ban on Russian crude rapidly approaching. However, other shifting factors present headwinds to record export volumes. Historic SPR releases – which have flooded the USGC market with additional supply – are set to conclude in November. Meanwhile, rebounding supply in Libya introduces competitive barrels for European refiners. As these variables develop in the months to come, how competitive will US barrels be in the global market?