In This Week in Petroleum, the EIA does a nice job with the changing economics of US imports from Saudi Arabia and Iraq…
“The price difference between Dubai/Oman medium sour grade oil, which serves as a benchmark price for similar grades produced through the Middle East, and Mars, a U.S. medium sour crude oil with similar properties, was at its lowest level for several years in 2016 (Figure 4). Under such pricing conditions, medium and heavy crude oils from Saudi Arabia and Iraq were attractive to U.S. refiners because they produced a profitable slate of finished products when processed in complex refineries. ”
Due to time lags we are still seeing high levels of imports from the Gulf:
“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 (Figure 3). ”
“After OPEC announced crude oil production cuts in late November 2016, the relative price of Dubai/Oman crude oil rose because supply reductions pledged by Middle East producers disproportionately affected medium sour crudes. In January 2017, the premium of Dubai/Oman over Mars reached its highest level in over a year, which is likely to encourage U.S. refiners to process more domestic medium sour barrels while reducing imports of comparable grades from the Middle East.”
Leave a Reply