The U.S. Is a Big Oil Importer Again

Trade ▶ Now that exports are allowed, the industry is hoarding foreign crude ▶ “Putting away oil is one of the few risk-free plays in the world”

In the three months since the U.S. lifted its 40-year ban on crude oil exports, a curious thing has happened. Rather than flooding global markets, U.S. crude shipments to foreign buyers have stalled. At the same time, imports into the U.S. jumped to a three-year high in what looks to be a reversal of a yearslong decline in the amount of foreign crude

it costs about $40 to $50 a barrel to build a storage tank and that companies that own them can make their money back in five years or so.

As long as futures prices remain higher than current ones, the incentive will remain to pump oil and store it. That leaves the U.S. stuck in a strange pattern where “the higher inventories go, the more downward pressure that puts on near-term prices, which only increases the incentive to store it,” says Citi Futures’ Evans. The only way to break that cycle is for interest rates to rise, says Verleger, which would increase the financing costs to build storage tanks. “As long as money is cheap, it’ll make sense to build storage tanks in the U.S.” �Matthew Philips

The bottom line U.S. oil production has fallen by about 600,000 barrels a day since peaking in 2015, and imports have filled the gap.