As discussed in this week's Crude Voyager, despite U.S. Gulf Coast crude exports rebounding for the week ended July 10, activity at Houston's Seaway Freeport and Seaway Texas City terminals weakened. This divergence from the broader export recovery is notable because both terminals have been closely linked to the recent Strategic Petroleum Reserve (SPR) release program. Since early April, increased loadings from the Seaway system closely tracked the acceleration in SPR withdrawals, suggesting that barrels originating from the Bryan Mound storage site were being moved through the Seaway pipeline network for export. As discussed previously, while the Department of Energy (DOE) does not disclose the final destination of individual SPR cargoes, the strong correlation between rising Seaway exports and record SPR drawdowns has made these terminals a clear indicator of emergency crude entering the export market.
At the peak of the War in Iran, an average of 500 Mb/d was loaded between Seaway Freeport and Seaway Texas City, contributing to a surge in total 2026 volumes to above 20 MMbbl (blue bar in chart above). However, this rampant export schedule has recently dwindled, as last week was the third consecutive week with no loadings recorded out of Seaway Freeport. Additionally, only one vessel has loaded out of Seaway Texas City in the last two weeks.
The slowdown at both Seaway terminals suggests that this source of incremental export supply is beginning to fade. As discussed in our Crude Billboard, the Department of Energy committed to release up to 172 MMbbl of crude as part of the broader 400 MMbbl coordinated International Energy Agency (IEA) emergency response to disruptions caused by the Iran conflict and the effective closure of the Strait of Hormuz. Although the authorization covers up to 172 MMbbl, the DOE is not obligated to release the full amount, and may choose not to if market conditions have stabilized. Through the week ended July 3, approximately 96 MMbbl, or 56% of the authorized U.S. volume, have been released.
The recent slowdown in Seaway Freeport and Seaway Texas City loadings aligns with both the expected conclusion of the approximately 120-day release window (mid-March through mid-July) of SPR barrels, and the retracement in crude prices from the triple-digit levels that prompted the unprecedented drawdown to the recent $70/bbl-$80/bbl range. If Seaway export activity continues to soften in the coming weeks, it would provide another indication that SPR releases have transitioned from a meaningful source of U.S. Gulf Coast export supply back toward more typical crude flows, reducing one of the key factors that supported elevated export volumes throughout the second quarter.
