- Output in U.S. drops to lowest level since November 2014
- Brent-WTI crude spread narrows to less than $1 a barrel
U.S. crude imports surged to the highest level in almost three years as a narrower gap between domestic and foreign prices attracted foreign cargoes.
Imports averaged 8.38 million barrels a day for the week ending March 18, the highest level since June 2013, Energy Information Administration data show. The increase was led by sharp gains in shipments from Venezuela and Nigeria.
Even though the U.S. has the highest stockpiles of crude since 1930, imports have increased as the price difference between U.S. and international benchmark prices has narrowed from almost $8 dollars a barrel a year ago to less than $1 a barrel. Domestic crude production has fallen to the lowest level since 2014 as the worst market downturn since the 1980s forces companies to cut back on drilling. West Texas Intermediate was 62 cents cheaper than Brent Wednesday.
"This shows that Brent is not trading at nearly a wide enough premium to WTI," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "We are not going to see a downturn in imports to the U.S. until WTI is trading at least at a $5 discount to Brent."
Total crude import levels were about 9 percent higher than the 7.69 million barrels a day the U.S. received the previous week, according to preliminary data released Wednesday by the EIA. Imports into the East Coast rose 65 percent while shipments to the Gulf Coast climbed 13 percent. The tally includes an increase in weekly imports from nations including Venezuela, Nigeria and Saudi Arabia.
Weather was also to blame for some of the increase. Fog and storms in the week ended March 11 kept some tankers from unloading in Houston, delaying imports into the following week.
"About two weeks ago, there was disruption to vessel traffic in the Houston Ship Channel," Stephen Schork, president of Schork Group Inc. said by phone from Villanova, Pennsylvania. "Logistically it was a nightmare. That’s what’s being reflected."