The End of An Era?

29 May 2025 POTEN & PARTNERS 

U.S. crude oil exports have reached a plateau Ever since President Obama lifted the 41-year-old U.S. crude oil export ban in December 2015, U.S. crude oil has played an increasingly important role in the tanker market. Despite logistical challenges due to the relatively shallow draft of U.S. Gulf ports, American producers have become one of the largest seaborne crude oil exporters. A mix of medium and long-haul clients in Europe, Asia and Africa (Dangote) offers employment opportunities for the whole range of crude tankers, from VLCCs down to Aframaxes, the latter also being used for reverse lightering operations in the area. However, after exports increased from a few hundred thousand barrels per day in 2016/2017 to an average of 4.0 Mb/d in 2023, growth has leveled off. In 2024, exports were 160,000 b/d lower than in 2023 and so far in 2025, we have seen a further 90,000 b/d decline. In the past, U.S. oil production, especially from the shale patch has proven to be very resilient, but it appears that the period of rapid production and export growth is in the rearview mirror. What can be expected from the U.S. in the coming years and how will that impact the tanker market?

Table 1 - Sources: EIA/Vortexa

U.S. crude oil exports are driven by a number of factors. The first, most obvious, is domestic production, in particular shale oil production. The United States still produces significant volumes of “conventional” crude oil from places like Alaksa (412 Kb/d in 2024), California (285 Kb/d) and the Gulf of Mexico offshore (1.8 Mb/d). However, the vast majority of U.S. output comes from shale deposits in North Dakota, Oklahoma, New Mexico and Texas. In April 2025, U.S. tight oil production totaled 9.15 Mb/d, representing almost 70% of total U.S. output.

U.S. tight oil production is currently under pressure. Oil prices have come down as heightened global economic uncertainty resulted in lower demand growth. Recent OPEC+ production increases have added to the downward pressure on crude oil prices. U.S. shale plays are classic examples of short-cycle oil. They can be brought online rapidly, but require constant reinvestment to maintain production levels, which makes them very sensitive to price movements.

Table 2 - Sources: EIA/Vortexa

WTI prices are currently in the $61-$62/barrel range, which is enough to maintain production. While breakeven prices vary considerably by company and geography, current consensus seems to be that if prices fall to the low-mid $50/barrel range, shale producers will be challenged, while prices at $70/barrel or more will encourage more production. If prices stay at current levels, U.S. tight oil production has probably peaked. The EIA, in their latest short term energy outlook, expects only a small pickup in output later this year 2025, before U.S. crude oil production starts to decline in 2026 (Chart 1). A lot of this will depend on the development of oil prices though. 

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