Foreign crude supply concentrated

May 6, 2013
It's no secret the jump in US oil production in recent years has dropped imports of foreign crude to the lowest levels since 1997—down 1.3 million b/d in the 4 weeks ended Apr. 19, the latest data available, from the comparable period in 2012.

It's no secret the jump in US oil production in recent years has dropped imports of foreign crude to the lowest levels since 1997—down 1.3 million b/d in the 4 weeks ended Apr. 19, the latest data available, from the comparable period in 2012. What is not as well known, said Energy Information Administration officials, is US crude imports are now more concentrated among the five biggest outside suppliers—Canada, Saudi Arabia, Mexico, Venezuela, and Iraq, in that order.

They provided 72% of the oil imported into the US last year, the biggest proportion since 1997 and up from 64% in 2009 when total US crude imports began to decline because of the recession. Despite a major reduction in total volume of foreign oil supplies, US imports from those five suppliers were up 8% over the last 3 years to an average 6.1 million b/d in 2012.

Canada's exports of crude to the US averaged a record 2.4 million b/d last year, up 8% from 2011. Saudi Arabia's supply increased 14% to 1.4 million b/d. However, US imports of crude from Mexico fell almost 12% to 972,000 b/d, dropping below 1 million b/d for the first time since 1994.

Venezuela's crude exports to the US rose 4% to 906,000 b/d last year, its first increase since 2007. It sent more crude to US refineries, which exported more gasoline and other petroleum products back to Venezuela. Iraq exported 474,000 b/d of crude to the US, up slightly more than 3% from 2011 to pull ahead of Nigeria as the fifth-largest oil supplier to the US for the first time since 1999. Iraq's oil production in the second half of 2012 topped 3 million b/d for first time since the end of the Gulf War in 1990.

Exports of Nigerian crude fell 42% to 405,000 b/d in 2012, the lowest level since 1985. Growing US production of light, sweet crude similar to Nigeria's Bonny Light and reduced demand among East Coast refineries contributed to the decline.

Foreign crude supplies to the US are likely to become more concentrated among Canada and Saudi Arabia and—to a lesser extent—Iraq.

Production declines

Mexico's crude production has been in steady decline for some years and is unlikely to make a sudden rebound. Although the US remains the primary market for Venezuelan crude, Venezuela's production has dropped 25%, and exports to the US have fallen roughly to the level seen before the late Hugo Chavez became president of that country in 1998. Neither is likely to improve under Chavez's hand-picked successor.

There are new concerns about security in Nigeria's oil producing region after a group claiming to be the new version of the Movement for the Emancipation of the Niger Delta (MEND) vowed to launch a wave of attacks this month. It's not yet clear if the new group has ties to the once formidable militant organization that shut in 28% of the country's production in 2006-2009.

Barclays Capital Commodities Research analysts recently noted a sharp surge in oil theft with the Nigerian finance minister estimating 300,000 b/d being stolen at a loss of $1 billion/month. "Even if MEND redux proves to be a pale imitation of the original organization, we believe that it will remain challenging for companies to operate in the Niger Delta and production will remain vulnerable to disruption," Barclays analysts said. However, they pointed out, "The ongoing variability in Nigerian crude production has contributed to making the market immune to the frequency and extent of such surprise disruptions."

In other news, EIA said Iran's exports of crude and condensate dropped last year to 1.5 million b/d—a 39% decline from the previous year to the lowest level since 1986 and down from 2.5 million b/d in 2011—as the US and the European Union tightened sanctions on Iran's oil sector to get that country to abandon its nuclear program. Oil exports make up 80% of Iran's total export earnings and 50-60% of government revenue.

Although Iran bucked four earlier rounds of UN sanctions, these tougher measures severely hamper its ability to export oil and its production of petroleum products. Iran's crude and condensate production is down 17% along with a 1% decline in domestic consumption of gasoline, diesel, jet fuel, and other products.