For years, North American crude markets were shaped by scarcity, disruption, and geopolitical risk. That era is fading fast. By the end of 2025, one region stands out as the clear fulcrum of a new market structure: US Gulf sour crude.
What’s unfolding is not a temporary imbalance or a short-lived glut. The US Gulf has become the epicenter of a structural shift in how heavy and sour crude is produced, priced, and traded across North America—and increasingly, the global market.
A Concentrated Wave of New Supply
The defining feature of today’s Gulf sour crude market is timing.
Between July and December 2025, multiple deepwater Gulf of Mexico projects reached first oil or materially ramped production within a remarkably short window. Individually, none of these developments would have broken the market. Together, they’ve reshaped it.
New barrels from Shenandoah, BP’s Atlantis and Argos expansions, and LLOG’s Salamanca project arrived almost simultaneously. More importantly, much of this production feeds into shared pipeline systems that converge at the Southern Green Canyon (SGC) pricing hub.
That convergence matters. Instead of being dispersed across multiple markets, incremental supply is being aggregated into a single benchmark—intensifying price pressure and accelerating changes in price discovery.
The Execution Data Confirms the Shift
This supply surge isn’t theoretical—it’s visible in drilling and completion activity.
In 2025 alone, 119 wells were drilled in the US Gulf, with activity heavily concentrated among a small group of operators and deepwater-capable rigs. Five operators accounted for roughly two-thirds of all wells drilled:
- Shell USA
- Chevron U.S.A.
- OXY USA
- CANTIUM
- BPX
On the contractor side, deepwater and harsh-environment rigs dominated activity. Enterprise and Transocean units consistently ranked among the most active, underscoring how capital is being deployed toward long-life, infrastructure-connected developments rather than short-cycle optionality.
This matters because it reinforces a key point:
the barrels reshaping Gulf sour crude pricing are coming from projects that were sanctioned years ago, executed with precision, and tied directly into shared export and pricing infrastructure.
Where the Wells Are Being Drilled: County-Level Concentration
The Gulf sour crude shift isn’t just about how much supply is coming online—it’s about where that supply is being developed.
In 2025, drilling activity was heavily concentrated in a small number of deepwater counties that are directly tied into shared production and export infrastructure feeding the Southern Green Canyon pricing system.
Wells Drilled by County (2025):
- Mississippi Canyon – 28 wells
- Green Canyon – 22 wells
- Alaminos Canyon – 17 wells
- Garden Banks – 8 wells
- Walker Ridge – 7 wells
- Keathley Canyon – 6 wells
Combined, Mississippi Canyon, Green Canyon, and Alaminos Canyon accounted for 67 wells—more than 56% of all Gulf wells drilled in 2025.
This concentration is critical. These counties are not frontier exploration zones; they are infrastructure-dense deepwater corridors where new production can be tied back quickly, ramped efficiently, and funneled into common pipeline systems. That geographic clustering accelerates supply convergence and amplifies pricing pressure at hubs like Southern Green Canyon.
Smaller—but still meaningful—activity across Garden Banks, Walker Ridge, and Keathley Canyon further supports long-life developments rather than short-cycle drilling programs.
The takeaway is clear:
Gulf sour crude growth is not diffuse. It is surgically concentrated in the most capital-efficient, infrastructure-connected parts of the basin.
Why Southern Green Canyon Suddenly Matters More
Southern Green Canyon has quietly transformed from a regional crude stream into a core pricing mechanism for US sour crude.
By the second half of 2025:
- SGC accounted for roughly a quarter of all ASCI spot trading
- Monthly trading volumes reached their highest levels since the mid-2000s
- Discounts to WTI widened to levels not seen in nearly two years
This isn’t just a pricing issue—it’s a structural one. As more production feeds into SGC, the benchmark itself becomes more liquid, more representative, and more influential.
In short, SGC is no longer reacting to the market—it’s shaping it.
Deepwater Economics Have Changed the Supply Response
One reason this oversupply feels different is that traditional market rebalancing mechanisms are weaker.
Deepwater Gulf projects involve massive upfront capital investment. Once production begins, operators have little incentive—or ability—to slow output in response to weaker pricing. The same barrels keep flowing regardless of short-term discounts.
Modern floating production systems and subsea tiebacks have also improved startup efficiency. Projects are reaching high utilization rates faster than in past cycles, compressing what used to be multi-year ramp-ups into mere months.
The result: sustained production growth even as prices weaken.
Canada and Venezuela Add Pressure—But Differently
It’s tempting to attribute Gulf sour weakness to Canadian heavy crude or Venezuelan barrels, but the reality is more nuanced.
Canadian producers now have meaningful access to Asia via the Trans Mountain Expansion, sending the majority of incremental barrels west rather than south. That means Canada is not flooding the US Gulf, even as production reaches record levels.
Venezuelan crude, meanwhile, has returned to the US market in limited volumes under sanctions waivers. While modest, these barrels directly compete with Gulf sour grades and reinforce the perception of abundance—especially among refiners.
Together, they don’t overwhelm the Gulf market—but they remove any sense of scarcity.
Refiners Benefit—Until They Don’t
For complex Gulf Coast refiners, abundant sour crude has been a gift. Wider discounts improve feedstock economics and allow refiners to optimize coking and conversion units.
But there’s a ceiling.
As sour discounts deepen, refinery margins compress elsewhere. Meanwhile, refinery closures—particularly on the US West Coast—are permanently removing heavy crude demand from the system.
Refiners are still buying, but they’re no longer bidding aggressively. That behavioral shift is just as important as the barrels themselves.
What This Means for the Market Going Forward
The US Gulf sour crude market has entered a new equilibrium regime:
- Supply is structurally high
- Production is slow to respond to price signals
- Benchmarks are becoming more liquid—and more punitive
- Discounts are no longer anomalies; they’re features
This environment favors scale, efficiency, and integration. Low-cost producers, sophisticated refiners, and well-positioned midstream operators are best equipped to thrive. Marginal projects and price-dependent developments face growing pressure.
Most importantly, the Gulf is no longer just another producing region. It is now the reference point for how North America prices and absorbs heavy and sour crude.
Why This Matters for Service Companies
For oilfield service and infrastructure providers, this shift changes where opportunity lives:
- More production doesn’t mean more drilling everywhere—it means more work where infrastructure, reliability, and optimization matter most
- Gulf-focused operators will prioritize uptime, flow assurance, and efficiency over growth at any cost
- Midstream, logistics, inspection, subsea, and production optimization services become more critical in a world where every barrel competes on margin
Understanding the Gulf sour crude dynamic isn’t just market insight—it’s commercial intelligence.
Bottom Line
The US Gulf sour crude market isn’t oversupplied by accident. It’s oversupplied by design—by capital already spent, infrastructure already built, and wells already drilled.
And that’s why the Gulf now sits at the center of North American energy’s next chapter.
