U.S. crude-oil supplies rose by nearly 100 million barrels in the last 13 weeks, but refiners are still hungry for foreign crude.
Crude imports to the U.S. rose last week to 8.2 million barrels a day, the highest weekly level since December, the U.S. Energy Information Administration said Wednesday.
This is still a sharp drop from the roughly 10 million barrels a day the country imported in the mid-2000s, before the shale-oil boom flooded the U.S. with domestic supplies. Some formerly large suppliers, like Nigeria, now deliver hardly any oil to U.S. shores.
But with crude supplies nearing storage capacity in some regions, why isn’t the U.S. importing less oil so to help shrink the domestic glut?
One major reason is that much the oil produced in the U.S. is light, sweet crude, and a lot of refineries are designed to process heavier types of oil like those produced in Canada or Venezuela.
While swelling stockpiles are a concern, most imports are coming to the Gulf Coast, a region that still has spare storage capacity. Crude-oil inventories in the Gulf Coast totaled 236.4 million barrels last week. The EIA puts crude-oil storage capacity in the region at 285.6 million barrels, but that number doesn’t include space in pipelines or storage that has been built since September.
Another reason is that with the global oil benchmark only trading about $5 a barrel more expensive than U.S. oil, it is cheaper to import foreign crude in some cases than to ship domestic oil by rail.
And finally, refiners are seeing strong demand. The U.S. consumed 19.2 million barrels a day of petroleum products in January, according to the EIA, the highest level for the month since 2008. Gasoline consumption typically rises in the late spring and summer as the weather improves and drivers take more vacations.
Refiners are profiting from relatively wide margins, meaning they can buy oil for cheap and make a large profit after processing it into gasoline and other fuels.
The high level of imports “reflects refiners’ seemingly endless appetite for cheap supplies, as well as the confidence that they have the capacity to market the resulting products,” said shipping-data provider ClipperData in a note. “The relentless flow of cargoes shows that refiners are much less worried about exhausting storage capacity than they are about missing out on a wide processing margin.”
