Executive Summary:
Rigs: The total US rig count decreased to 602 the week of Sept. 12.
Infrastructure: Middle East supply disruptions have pushed WTI above $100/bbl, increasing pressure on the US to supply more crude and refined products to the global market. However, tight Permian pipeline capacity, dock limitations and high refinery utilization mean the US can only provide a limited near-term response.
Supply and Demand: The US natural gas pipeline sample, a proxy for change in oil production, decreased 1.8% W-o-W across all liquids-focused basins for the week ending Sept. 21.
Rigs:
The total US rig count decreased to 602 for the week of Sept. 12. Liquids-driven basins decreased to 466, down 7 rigs W-o-W.
- Anadarko (+1): Validus Energy
- Bakken (-1): Murex
- Uinta (-1): Anschutz
- Permian (-6):
- Midland (-3): Occidental, Kinder Morgan, and Amtex Energy
- Delaware (-3): Exxon, TRP, and Riley Exploration
Infrastructure:
Crude oil prices have surged past $100/bbl on fresh supply disruptions in the Middle East. It’s a scenario that typically calls on more US barrels as the market’s fallback plan, but infrastructure constraints may limit how much more US crude oil reaches the market.
The WTI October contract pushed past $100/bbl on Sept. 9 after the Houthi tribe advanced along Yemen’s Red Sea coast and launched drone attacks that damaged Saudi Arabia’s East-West Pipeline. The Houthis also captured the island of Mayun at the entrance to the Red Sea, positioning the rebel group to threaten shipping through the Bab el-Mandeb Strait. Prices held over $100 for 12 days but have eased on rumors of a potential deal with Iran, trading near $95 Tuesday (Sept. 22).
The East-West Pipeline has been the Saudis’ main workaround to keep crude exports flowing after Iran closed most traffic through the Strait of Hormuz. The pipeline normally moves 4–5 MMb/d.
Saudi Arabia on Tuesday said it restored some flows through the East-West line, though full repairs are likely to take four to six weeks. The country is also offering more crude loading via Oman to address shortages.
The disruption to the East-West line means both of the Persian Gulf’s major release valves are now constrained. The Strait of Hormuz, which historically has carried ~20 MMb/d, is now moving about 4.9 MMb/d, Forbes reports. The Houthis’ advance also puts exports through Saudi Arabia’s Yanbu port on the Red Sea at risk.
Persian Gulf shut-ins averaged 6.7 MMb/d in August, up from 5.0 MMb/d in July, according to the Energy Information Administration (EIA). The EIA expects shut-ins to remain above 5.5 MMb/d and average 5.7 MMb/d through 4Q26, while the International Energy Agency (IEA) has pushed its forecast for a full Persian Gulf recovery into 2027.
Pipe, Dock Constraints Cap Upside
The US oil industry normally steps up in response to higher prices, ramping drilling and moving more barrels to export docks. But constraints on infrastructure are likely to limit upside this cycle.
Pipelines are the primary bottleneck. Permian-to-Gulf Coast crude pipes are already operating at ~95% utilization toward Corpus Christi and 90% toward Houston and Nederland, according to East Daley’s Crude Hub Model. Throughput was elevated along these routes even before the Iran conflict caused oil prices to jump; we estimate only about 500 Mb/d of combined spare capacity on Houston- and Corpus Christi-bound Permian oil pipes currently. Moreover, these systems have very few incremental expansion opportunities that can be brought online quickly.
Export docks in Corpus Christi and Houston appear to have more leeway to load additional barrels, running at 47% and 33% utilization, respectively. However, the aggregate numbers mask what’s happening at individual docks, particularly those that handle both crude and refined products out of shared infrastructure. For example, Buckeye Partners’ Texas Hub in Corpus Christi is operating at roughly 86% utilization, because it is splitting capacity between crude oil and products rather than running crude only. Many docks are also located in shallow waters and can’t directly load the very large crude carriers (VLCCs) favored for long-haul crude routes. Exporters must use reverse lightering on smaller tankers at these docks, an obstacle to ramping capacity.
Export data shows the constraints. US crude oil exports surged in the spring, passing 5.5 MMb/d in May vs ~4 MMb/d before the Iran war, according to EIA data. But nearly all the gains came from an emergency release from the Strategic Petroleum Reserve (SPR). Without the temporary SPR fillip, crude exports have reverted back to the 4 MMb/d level that prevailed prior to the Middle East conflict (see figure).
Distillate exports have ramped in response to soaring global diesel prices, reaching 1.7 MMb/d in September vs the 1.3-1.4 MMb/d level at the start of the year. But these exports also have a ceiling. Gulf Coast refineries are operating at ~87–90% utilization, limiting how quickly incremental crude can be converted into gasoline, diesel or jet fuel.
The US industry can respond, but it will take time to expand infrastructure. The prevailing 5-6 MMb/d global supply gap is far larger than what can be closed now. If Middle East disruption extends into 2027, the industry will need to look where additional pipeline, refining and dock capacity can realistically be added.
Supply and Demand:
The US natural gas pipeline sample, a proxy for change in oil production, decreased 1.8% W-o-W for the week ending Sept. 21 across liquids-focused basins.
Volumes only increased in the Rockies W-o-W, up 2.4%. Declines came from the Gulf of America (-3%), Permian (-1.3%), Barnett (-6.3%), Arkoma (-0.1%), the Eagle Ford (-14.7%), Bakken (-1.7%) and the Anadarko (-1.5%). The Rockies and the Gulf of America have a high correlation between gas volumes and crude oil volumes, whereas the Permian and Eagle Ford basins correlation is less than 45%.
Vessel traffic monitored by East Daley along the Gulf Coast increased W-o-W. A total of 30 vessels were loaded for the week ending Sept. 19, up seven from the prior week.