Americas heavy crude glut widens as freight squeeze disrupts exports

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Americas heavy crude glut

Highlights

Supertanker freight rates from the U.S. Gulf Coast to Asia have risen over fivefold since February, with Americas-to-Asia shipping now exceeding $80 million, or $40 per barrel.
Refinery utilization in the U.S. has averaged 93.5% in 2024, the highest in 28 years, yet heavy crude processing is constrained, intensifying the regional supply glut.
Benchmark heavy crudes like Western Canada Select, Vasconia, and Oriente have each dropped over $10 per barrel to six-week lows, with prices near $74–$84 per barrel excluding shipping.

Freight surge traps barrels in the Americas

As reported by Reuters, rising tanker costs are preventing surplus heavy crude from North and South America from moving efficiently to overseas buyers, deepening a regional oversupply. Analysts say producers in Venezuela, the U.S. and Canada depend on exports to Asia to balance their markets, but freight inflation is now undermining that trade flow.

Scott Shelton, an energy specialist at TP ICAP, said the problem comes down to shipping. The cost of hiring a supertanker from the U.S. Gulf Coast to Asia has risen more than fivefold since February, while ship-to-ship transfers in the Gulf of Oman are tying up vessels globally.

According to Signal Maritime analyst Georgios Sakellariou, sending oil from the U.S. Gulf Coast to Europe cost about $46 million, or $24.50 a barrel, last week, including transfer and other expenses. That compares with $6.5 million, or about $4 a barrel, before the Iran war broke out in late February, while shipping from the Americas to Asia has climbed to more than $80 million, or roughly $40 a barrel, from around $10 million to $15 million near the start of the year.

Refinery constraints deepen market split

Heavy crude, a denser grade favored by many refiners for its lower cost and stronger margins, is usually attractive when shipping remains affordable. But Gulf Coast refiners have already bought as much as they can process, even as high diesel prices would normally support stronger demand for heavier barrels that yield more of the fuel.

U.S. refineries have operated at an average of about 93.5% of capacity so far this year, according to the Energy Information Administration. That marks the highest level in 28 years, but even complex plants designed for heavier crude can process it only up to a certain share of total throughput.

The supply buildup is also being reinforced by rising output and policy-driven flows. Venezuelan exports have surged since the U.S. captured former President Nicolas Maduro in January and began pushing to reactivate the country's oil sector, Canadian output is at a record, and Washington has released more than 130 million barrels from its emergency reserve.

Price weakness is already showing up in heavy grades across the region. Argus Media says Canadian, Colombian and Ecuadorian benchmark heavy crudes have each fallen by more than $10 a barrel to their lowest levels in six weeks, with Western Canada Select around $74, Colombia's Vasconia near $84, Ecuador's Oriente near $76, and Venezuelan crude around $74.50 a barrel, excluding shipping costs.

Our earlier article on the global diesel squeeze examined how war-related disruptions to refining capacity and access have pushed diesel prices higher and exposed weak points in supply chains. It also described how policy intervention—such as coordinated strategic stock releases and shifts in export restrictions—can temporarily redirect fuel flows while increasing the risk of fragmentation in the global energy system.

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