American Crude Is Becoming A Safe Haven

Big changes are happening across the energy landscape due to the Iran war, and it's not just the prices jumping at the pump. Those, too, have been climbing higher with the average price for a gallon of gas now standing at $4.09, according to AAA, up 37% since Operation Epic Fury began on February 28. A barrel of WTI (CL1:COM) is up by the same percentage, climbing from $68 to the current $93/bbl.

Latest development: The U.S. has nearly transformed into a net crude exporter for the first time since World War II. Exports last week climbed to 5.2M barrels per day, the highest level in seven months, and imports were slightly above that level, with the gap narrowing to just 66,000 bpd. The U.S. still imports a ton of crude since its refineries were set up decades ago to process imported heavier sour grades, rather than the domestic light sweet crude that has been gushing since the fracking revolution in the 2000s.

Attacks on regional energy infrastructure and the closure of the Strait of Hormuz led to the loss of 10.1M bpd of supply in March, according to the International Energy Agency, which called it the largest oil supply disruption in history. U.S. crude benchmark WTI is now gaining prominence as a more secure alternative to Middle Eastern barrels, with traders avoiding conflict zones and refiners looking for alternative sources.

Profit windfall? Global oil companies are set to make billions of dollars from the current situation, as well as U.S. giants like ExxonMobil (XOM), Chevron (CVX) and ConocoPhillips (COP). While they are making more money per barrel, it is still a "high price, high risk" environment, where supply chain breaks can wipe out gains, as well as disruptions preventing the physical delivery of cargoes and high operational or hedging costs. The return of cash to shareholders might be a bigger focus than massive production spikes, so pay close attention when the energy majors report earnings at the end of April.