US crude oil imports from Saudi Arabia, Iraq expected to decline

Imports from Saudi Arabia and Iraq combined recently approached 5-year high

In November 2016, high production and seasonally low internal demand contributed to record crude oil exports from Iraq and near-record exports from Saudi Arabia, according to the US Energy Information Administration, with published data dating to Jan. 2002 provided by the Joint Organizations Data Initiative (JODI).

In that same month price spreads in the market supported high levels of U.S. crude imports from those countries.

However, market developments, including the November 2016 agreement among certain members of the Organization of the Petroleum Exporting Countries (OPEC) to reduce production and the recent widening of the spread between Dubai/Oman crude and U.S.-produced Mars crude, suggest U.S. imports from Saudi Arabia and Iraq are now becoming less attractive to U.S. refiners.

According to the latest JODI data, Saudi crude oil exports reached 8.3 million barrels per day (b/d) in November 2016, the highest level since May 2003, before declining to 8.0 million b/d in December. Saudi exports generally increase from August to November as seasonal declines in domestic consumption increase availability of oil for export.

In Iraq, exports reached a record high of almost 4.1 million b/d in November and remained at that level in December (Figure 1).

According to JODI data, Saudi and Iraqi production levels were relatively high prior to the pledged production cuts beginning January 2017, with December 2016 volumes up 321,000 b/d and 700,000 b/d, respectively, from their year-ago levels, creating an opportunity to increase exports.

 

Although crude oil exports from Saudi Arabia and Iraq increased in November and December, the transit times result in a delay before these shipments arrive in the United States and appear in EIA import data.

Shipments take an estimated 47-51 days to reach the U.S. Gulf Coast from the Persian Gulf after traveling around the southern tip of Africa (Figure 2). Using a smaller vessel capable of transiting the Suez Canal in Egypt, a voyage from the Persian Gulf to the U.S. East Coast takes an estimated 32-36 days. Traveling from the Persian Gulf to the U.S. West Coast on a Trans-Pacific route requires an estimated 39-43 days.

Given transit times, cargoes exported from Saudi Arabia and Iraq in November and December 2016 would be expected arrive in the United States between December 2016 and February 2017.

Imports from Saudi Arabia into the United States increased for five consecutive weeks, rising from 1.0 million b/d for the week ending January 6 to 1.3 million b/d for the week ending February 10.

Similarly, U.S. imports from Iraq grew for five consecutive weeks, increasing from 373,000 b/d for the week ending December 9, 2016 to 723,000 b/d for the week ending January 13, 2017

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