NEW YORK: The global appetite for U.S. light sweet crude is waning as rising output from OPEC+ countries and new oil streams from various producers flood the market, offering alternative options to European and Asian refiners. The resulting oversupply has weighed on U.S. crude exports and led to a significant drop in prices for key American oil grades.
Since April, OPEC+ nations—including heavyweights like Saudi Arabia and Russia—have ramped up or pledged to increase output by 1.37 million barrels per day (bpd), nearly two-thirds of the 2.2 million bpd they plan to restore. This boost is part of a strategy to reclaim lost market share and discipline members exceeding production quotas.
At the same time, global oil producers are navigating a climate of economic and policy uncertainty. Volatile trade tensions and the growing shift toward renewable energy are clouding long-term prospects, leaving U.S. producers particularly vulnerable.
America, the world’s top crude producer, saw its oil exports fall to an average of 3.8 million bpd in May, down from 4 million bpd in April, according to Energy Information Administration (EIA) data. U.S. producers are now considering output and workforce cuts amid sluggish demand, despite President Donald Trump’s calls for expanded domestic production.
The impact is already visible in prices: WTI-Midland, a prominent light sweet crude from the shale-rich Permian Basin, has seen its premium over U.S. crude futures plunge 45 per cent since March to just 60 cents. Light Louisiana Sweet has also lost ground, slipping 30 per cent to a $2.70 per barrel premium.
"The market is clearly under pressure as OPEC accelerates its output. Light sweet grades are broadly weak," said Jeremy Irwin, global crude lead at Energy Aspects. He noted that demand is likely to slide further as European refiners shift to medium grades during the summer season.
In Europe, U.S. light sweet crude shipments fell to 1.4 million bpd in May from 1.6 million bpd in April. This figure is also down from 1.7 million bpd exported in May 2024, according to commodity tracking firm Kpler. Despite their ease of processing, light crudes are facing reduced demand as many refineries now prefer heavier, sour grades that yield better economic returns.
ALSO READ: Ambuja Neotia Marks Rs 80 Cr Foray into Assam with Women & Child Hospital in Guwahati
Asian refiners, emerging from seasonal maintenance shutdowns, and European refiners ramping up for summer fuel production, are increasingly choosing medium-sour crudes. Lower prices for UAE’s Murban crude have made it less cost-effective to ship WTI to Asia, said Energy Aspects analyst Richard Price.
OPEC+’s output hike is also aimed at pressuring members like Kazakhstan, which has significantly exceeded its production target. The surplus has brought more CPC blend crude into the European market, further crowding out U.S. barrels.
Additional competition is coming from countries like Guyana and Brazil, which already export 400,000 bpd each to Europe and may increase their volumes. Other light sweet options from Libya, Algeria, and Norway’s Johan Castberg field are also expanding refiners’ sourcing alternatives, said Vortexa analyst Rohit Rathod.
According to the EIA, global oil consumption is expected to grow by 970,000 bpd in 2025 and 900,000 bpd in 2026. However, crude production is projected to increase at a slower pace, rising by 840,000 bpd in 2025 and 680,000 bpd in 2026.
Despite the growth in overall oil use, demand is leaning toward products best refined from heavier barrels. “This trend suggests that refiners will favour medium-sour grades, leading to increased throughput of such crudes and price discounting for light sweet varieties,” said Janiv Shah, vice president of commodity markets at Rystad Energy.
FIRST Business Portal addressing the potential of business capability of North East Region.
