Black Sea and Red Sea are both in double trouble! American oil is being crazy "snapped up" by buyers from Asia and Europe, causing a surge in WTI premiums.

Notice, the warming demand for U.S. crude oil from Asia and Europe comes at a time when geopolitical tensions are rising, and is one of the first signs of heightened market concerns about the adequacy of oil supply. Supported by Iran, Houthi militants attacked two Saudi oil tankers in the Red Sea, adding a new volatile factor to the conflict involving Iran and pushing international benchmark oil prices above $100 per barrel. Meanwhile, after drone attacks on Black Sea shipping by Ukraine, Kazakhstan has reduced oil production, prompting buyers to seek similar grades of crude oil including those from the Permian Basin. On the domestic front in the United States, the situation is equally dire: if U.S. crude oil exports continue to grow rapidly, it will eventually drive up consumer fuel costs and increase inflation pressures on the eve of the midterm elections in the United States. According to traders, on Thursday, September WTI crude oil delivered along the U.S. Gulf Coast had a premium of about $5 per barrel compared to the global benchmark oil price. The day before, this price difference was still at a discount of $2. Some Asian buyers are taking unconventional measures, such as rushing to purchase temporary spot containers that will be loaded in a few weeks. Other buyers are hoping that oil tankers can navigate dangerous areas around the Strait of Hormuz and the Red Sea by shutting down the Automatic Identification System (AIS) transponder. Exxon Mobil and oil trader Petroineos have withdrawn their premium quotes of $6.75 per barrel and $6.55 per barrel respectively for WTI Midland crude oil in the European market, signaling increased price volatility. Since the conflict between the U.S. and Israel and Iran escalated in late February, U.S. crude oil demand has been strong due to its distance from the conflict zone. Data from Kpler Ltd shows that U.S. oil exports surged to a historical high of 5.66 million barrels per day in May, highlighting its role as the "last supplier." Recent reopening of the Strait of Hormuz temporarily allowed oil tankers stranded in the Persian Gulf to sail to Europe and Asia, causing a decline in export volumes to these regions. Sparta Commodities notes that Kazakhstan's production cuts make WTI more competitive in regions with traditional refining operations in the Mediterranean and Northwestern Europe. However, this supply interruption is likely temporary, indicating that the demand pull for U.S. crude oil may not be sustainable. As demand rises, U.S. crude oil inventories continue to shrink. U.S. commercial crude oil inventories are nearing an eight-year low, and emergency reserves have fallen to their lowest level since 1983.