U.S. refiners are relying more on North American crude than at any time since 1986 as a glut of supply makes local oil cheaper than imports from overseas.
Domestic production and imports from Canada and Mexico made up 85 percent of crude processed at U.S. plants in January, the most since March 1986, according to U.S. Energy Department data.
Refiners are buying locally as surging output in the U.S. and Canada helped boost U.S. stockpiles to 471.4 million barrels last week, the highest since 1930. West Texas Intermediate, the U.S. benchmark, averaged $6.26 a barrel less than international marker Brent in the first quarter, widening from $3.94 in the fourth quarter of 2014.
“A lot of the refiners that are independent see that North American crude is cheaper and they can keep their costs low,” Carl Larry, director of oil and gas for Frost & Sullivan LP in Houston, said in a phone interview. “This is something the U.S. has strived for for a long time: oil security. We have the supply between Mexico, Canada and the U.S. to kind of cover our refinery runs right now.”
Surging U.S. oil production from shale transformed the U.S. into the world’s third-largest crude producer in 2013, BP Plc data show. Rising supplies helped cut crude prices by more than half last year with WTI falling to $42 a barrel last month from a high last year of $108.
As U.S. production rose, imports declined by 36 percent in eight years, the data show. U.S. imports from Saudi Arabia, the world’s biggest crude producer, fell to a five-year low of 788,000 barrels a day in January.
West Texas Intermediate for May delivery fell $1.31 to $48.78 a barrel in electronic trading on the New York Mercantile Exchange at 12:56 p.m. London time. Brent crude lost $1.79 to $55.31.