US oil imports surged last week, with almost half of the extra crude arriving from Saudi Arabia, as foreign producers took market share from the struggling American shale patch.
The federal Energy Information Administration on Thursday said Saudi supplies to the US jumped almost 1m barrels a day during the week ending May 22, to 1.6m b/d, while commercial imports from all countries soared to 7.2m b/d, almost 40 per cent more than the week before.
“The armada of ships bringing Saudi crude to the US has arrived,” said Amrita Sen, a director at Energy Aspects, a consultancy.
The vessels were launched by the kingdom before it called a halt to the price war on April 12 and agreed new production cuts with Russia. Those supply curbs began in May — but the scale of the kingdom’s original assault on the US shale patch is now becoming clear, analysts said.
“The optics for Saudi crude aren’t so great in Texas right now,” said Bill Farren-Price, director at RS Energy Group, a consultancy. “Despite their huge cuts, the April export surge has just started unloading, with yet another clue for Permian operators as to why US oil prices remain on the floor.”
US oil production continues to fall sharply, as operators shut wells and reduce capital expenditures to cope with the worst crude price crash in decades. The EIA said output dropped to 11.4m b/d in the week ending May 22. Many analysts say production has already fallen to as low as 10m b/d, compared with 13m b/d earlier this year.
Last month, West Texas Intermediate, the US benchmark, traded below zero for the first time in history, sending shockwaves through a shale patch where producers need almost $50 a barrel to make a profit. WTI was up at about $33.72 on Thursday evening.
The crash has dented hopes that the US could establish self-sufficiency in oil supply. President Donald Trump has repeatedly lauded the US’s “energy independence”. But net petroleum imports rose again last week to 1.2m b/d, according to the EIA, well above the level a year ago.
“America’s net-exporter vacation is over for now,” said Kevin Book, managing director at ClearView Energy Partners, a Washington-based consultancy. “But we’ll be showing the photographs for years.”
Despite the easing of virus lockdown measures around the country, US oil demand also dropped by about 4 per cent against the previous week, the EIA said. At 16m b/d it was a quarter lower than a year earlier.
More than 40m workers claimed unemployment benefits in the US last week, according to the country’s labour department.
The extra oil imports pushed US crude inventories sharply higher. This ate into some storage capacity, but utilisation rates remain well beneath the high levels that sparked WTI’s collapse below zero last month.
Imports from countries other than Saudi Arabian including Canada, Mexico and Opec producers Nigeria and Iraq, also rose last week — and more are coming, said analysts.
Saudi imports “are likely to remain high in the next few weeks but they will fall sharply from mid-June,” as the Opec cuts take effect, said Ms Sen.
TankerTrackers.com, a US-based maritime tracking research company, said Saudi Arabia launched 33 very large crude carriers destined for the US during March and April, with almost 68m barrels on board. Up to 29m barrels of crude remain on 14 vessels yet to be unloaded, it said.
The kingdom’s oil is being unloaded just two months after Mr Trump lobbied Riyadh to end the price war. Saudi Arabia did — and responded to more American pressure earlier this month by raising the price of its oil to the US and promising to cut more production.
Still, some in the shale patch will wonder how so much foreign oil could be landing on US shores just as most of the country’s operators slash supply, idle rigs, and cut jobs.
“Capitalism is buying cheap crude from the lowest-cost seller,” said Mr Book.