Heavy sour crude imports to U.S. climb as refiners boost output
Heavy sour crude oil imports to the United States from countries including Mexico and Saudi Arabia have jumped to the highest level in about a year as refineries boost output to meet growing summer demand, traders and analysts said.
U.S. refiners have boosted refinery rates to pre-pandemic levels, with overall capacity use hitting 92.9% in the most recent week, the Energy Information Administration said. That is the highest since January 2020, reflecting a sharp rebound in fuel demand, which as of last week was just 4% below June 2019 levels.
The United States is the world’s largest gasoline consumer, and demand has picked up with more than half of the nation’s eligible population fully vaccinated from the coronavirus. However, U.S. oil production has not recovered its pre-pandemic peak of nearly 13 million bpd, instead sitting at around 11 million bpd.
The discount for U.S. oil futures to Brent futures has shrunk to its smallest since late last year, discouraging international purchases of American heavy sours.
Mars Sour, a grade produced off the Louisiana coast, sank to its lowest levels against U.S. crude in nearly a year earlier this month.
The combination of rising imports from Mexico and Saudi Arabia and the tight U.S.-to-Brent futures spread is expected to further weigh on U.S. heavy sour grades, traders said.
Maya crude imports into the U.S. Gulf are closing out June at over 530,000 bpd, the highest since May 2020, said Matt Smith, director of commodity research at ClipperData. “Mexico has ramped up exports this month to their highest pace since early 2019.”
Shipments from Saudi Arabia to the United States are expected to rise to 12.4 million barrels in July, the highest since June 2020, according to Refinitiv Eikon data, much of which is set to arrive on the U.S. West Coast, dealers said.
Imports of other Middle Eastern crude grades are also likely to pick up over the coming weeks, traders said, including Iraqi barrels, which are now priced more attractively than Saudi barrels, one trader said. Iraqi exports to the United States could pick up by August or September.
Source: Reuters (Reporting by Devika Krishna Kumar and Laila Kearney in New York Editing by Matthew Lewis)