Canadians, Saudis grab market share from U.S. patch

U. S. oil imports surged last week, with almost half of the extra crude arriving f r om Saudi Arabia, as foreign producers took market share from the struggling American shale patch.

The federal Energy Information Administration said Saudi supplies to the U. S. jumped almost 1 million barrels a day during the week ended May 22, to 1.6 million bpd, while commercial imports from all countries soared to 7.2 million bpd, almost 40-per-cent more than the week before.

“The armada of ships bringing Saudi crude to the U.S. has arrived,” said Amrita Sen, a director at Energy Aspects, a consultancy.

The vessels were launched by the kingdom before it called a halt to the price war on April 12 and agreed new production cuts with Russia. Those supply curbs began in May — but the scale of the kingdom’s original assault on the U. S. shale patch is now becoming clear, analysts said.

“The optics for Saudi crude aren’t so great in Texas right now,” said Bill Farren- Price, director at RS Energy Group, a consultancy. “Despite their huge cuts, the April export surge has just started unloading, with yet another clue for Permian operators as to why U.S. oil prices remain on the floor.”

Imports from countries in addition to Saudi Arabia, including Canada, Mexico and OPEC producers Nigeria and Iraq, also rose last week — and more are coming, said analysts. Canadian oil exports jumped to 3.2 million bpd last week, after falling below 3 million in the previous two weeks.

U. S. oil production continues to fall, as operators shut wells and reduce capital expenditures to cope with the worst crude price crash in decades. The EIA said output dropped to 11.4 million bpd in the week ending May 22.

Many analysts say production has already fallen to as low as 10 million bpd, compared with 13 million bpd earlier this year.

Last month, West Texas Intermediate, the U.S. benchmark, traded below zero for the first time in history, sending shock waves through a shale patch where producers need almost US$ 50 a barrel to make a profit. WTI was up at about US$33.72 on Thursday evening.

The crash has dented hopes that the U. S. could establish self- sufficiency in oil supply. President Donald Trump has repeatedly lauded the U. S.’ s “energy independence.” But net petroleum imports rose again last week to 1.2 million bpd, according to the EIA, well above the level a year ago.

“America’s net- exporter vacation is over for now,” said Kevin Book, managing director at Clearview Energy Partners, a Washington- based consultancy. “But we’ll be showing the photographs for years.”

Despite the easing of virus lockdown measures around the country, U. S. oil demand also dropped by about four per cent against the previous week, the EIA said. At 16 million bpd it was a quarter lower than a year earlier.

More than 40 million workers claimed unemployment benefits in the U.S. last week, according to the country’s labour department.

The extra oil imports pushed U. S. crude inventories sharply higher. This ate into some storage capacity, but utilization rates remain well beneath the high levels that sparked WTI’S collapse below zero last month.

Saudi imports “are likely to remain high in the next few weeks but they will fall sharply from mid- June,” as the OPEC cuts take effect, Sen said.