Market News

BY Stephanie Kelly and Robert Harvey

NEW YORK (Reuters) -Rising OPEC+ supplies and new streams of oil coming online globally are increasing options for European and Asian refiners and weighing on export demand for light sweet U.S. crude, contributing to lower prices in the country's main oil-producing regions.

The U.S., the world's largest crude producer, is facing increasing competition as the Organization of the Petroleum Exporting Countries and its allies pump more oil in a bid to regain market share and punish members that over-produce.

Since April, OPEC+ countries including Saudi Arabia and Russia have made or announced increases totaling 1.37 million barrels per day, or 62% of the 2.2 million bpd they aim to add back to the market.

The additional supplies come at a time of broad uncertainty for global oil producers as they assess how volatile trade policies are impacting the world's economic outlook and prepare for a longer-term future in which greener fuels could displace their barrels.

For the U.S., lower demand for a significant portion of its crude will likely add to a complicated outlook for producers already digesting on-again, off-again tariffs from President Donald Trump's administration. Companies are considering cutting output and jobs even as Trump urges higher domestic production.

U.S. exports fell to an average of 3.8 million bpd in May from an average of 4 million bpd in April, according to an analysis of weekly Energy Information Administration data.

Prices have declined for crudes such as WTI-Midland, a key sweet grade from the U.S. shale region. Since early March, its price is off by 45% to a 60-cent premium to U.S. crude futures.

Light Louisiana Sweet from the U.S. Gulf Coast has fallen by about 30% to a $2.70 per barrel premium over the same period.

"That's a part of OPEC accelerating. Light sweets are weak, broadly speaking," said Jeremy Irwin, global crude lead at Energy Aspects, adding that demand is expected to fall further as European refiners favor medium crudes in the summer months.

The U.S. sent 1.4 million bpd of light, sweet crude to Europe in May, versus 1.6 million bpd in April, data from Kpler showed. In May 2024, the U.S. exported 1.7 million bpd of light, sweet crude, which is lighter in density and lower in sulfur content, to Europe.

While light crudes are typically easier for refineries to process, many global refineries have invested in upgrading capacity to run heavy-sour grades, which are usually cheaper and still yield sufficient quantities of higher-value fuels.

As Asian refiners come out of turnaround season - when plants reduce output for maintenance purposes - and European refiners ramp up fuel production going into summer, demand for medium-sour grades has increased.

GLOBAL SUPPLY MEETS UNCERTAIN DEMAND

Increased OPEC+ exports will primarily flow into Asia. Lower prices for Murban crude produced in the United Arab Emirates have made it unprofitable to export WTI to Asia, said Richard Price, an oil markets analyst at Energy Aspects.

OPEC+ is increasing output more quickly than expected this year to punish allies such as Kazakhstan, which has produced well above its OPEC+ target.

"The rise in Kazakh crude production means greater availability of CPC blend crude, which is increasingly competing with WTI into Europe," said Matt Smith, a lead oil analyst at Kpler. CPC Blend is light density crude, similar to WTI-Midland.

Additionally, Guyana and Brazil's exports into Europe could increase from the 400,000 bpd they each already send, if European refiners can absorb it, Smith said.

Other sweet grades including barrels from Libya and Algeria, and Norway's new Johan Castberg stream, are giving European refiners more choice, Vortexa analyst Rohit Rathod said.

Global petroleum consumption is expected to grow by 970,000 bpd in 2025 and 900,000 bpd in 2026, the EIA said, while global crude production is expected to grow by 840,000 bpd in 2025 and 680,000 bpd in 2026.

But demand growth currently is mainly fueled by oil products that are best refined from heavier barrels, said Janiv Shah, vice president of commodity markets at Rystad Energy.

"As such, we expect increased throughput of available medium sour barrels and some discounting of light sweet grades."

(Reporting by Stephanie Kelly in New York, Robert Harvey in London and Arathy Somasekhar in Houston; Editing by Nia Williams)