US petroleum imports mark largest 6-month decline in more than a decade

July 18, 2002
Due to a combination of increased domestic supplies and "exceptionally weak" demand, US petroleum imports fell more than 8% during the first half of this year.

Sam Fletcher
OGJ Senior Writer

HOUSTON, July 17 -- Due to a combination of increased domestic supplies and "exceptionally weak" demand, US petroleum imports fell more than 8% during the first half of this year—the largest 6-month decline in more than a decade, officials at the American Petroleum Institute in Washington, DC, reported Wednesday.

Despite that reduction in volume, however, imports of oil and petroleum products totaled 11.17 million b/d—58% of all US demand—during the first 6 months of 2002, API officials said.

Weaker demand
US demand for oil weakened this year as a result of sluggishness in some economic sectors, mild weather during the winter heating season, the switch among industrial customers from fuel oil back to now-cheaper natural gas, and a sharp drop in air travel since the Sept. 11, 2001, terrorist attacks on the US.

Domestic petroleum deliveries, a prime indicator of demand, fell more than 2% during the last 6 months and were down in each of the past 4 quarters to date. "A similar string of quarterly declines has not been experienced since the recession of the early 1990s," said API officials.

However, they reported the rate of decrease moderated during the latest quarter. Domestic petroleum deliveries slipped 1.7% during April-June. That's about 1% less than the first quarter's decline, with June even managing a modest increase, said API officials.

Products demand breakdown
Among major petroleum products, only US gasoline deliveries demonstrated growth during the first half of 2002, up 1.9% from the same period a year ago.

Deliveries of all other major products—distillates, jet fuel, and residual fuel oil—fell during the first half, compared with year-ago levels. Distillate deliveries, including both heating oil and diesel, increased in June for the first time this year, up 1.7% from the same month in 2001. But for the full 6 months, it was down 6.5% from last year's levels.

The post-Sept. 11 falloff in commercial flying triggered a 4.7% drop in US demand for kerosine jet fuel to 1.67 million b/d in June. For the full 6 months, it was down 6.5% to the lowest level since the first half of 1997, officials said.

US demand for residual fuel, a competitor for natural gas use in heavy industrial boilers during periods of high gas prices, plummeted 34.7% below last year's level in June and was down 28.6% for the full 6 months.

Refiners squeezed
Although activity among US refiners was generally down during the first half of this year, gasoline production totaled 8.25 million b/d—a new January-June record, "albeit by a very scant one-sixth of 1%," said API officials.

"A year-to-year decline in gasoline production during the second quarter was more than offset by the first quarter's increase, while additional supplies came from record gasoline imports," they reported.

Refining could not escape the overall effects of weak petroleum demand, however; inputs fell from year-ago levels for the fourth quarter in a row. As with demand, API officials said, there has not been a similar string of quarterly declines in refinery activity for more than a decade.

Stocks, production
Nonetheless, API reported US petroleum inventories remained at "comfortable" levels at the end of June. Crude inventories were up 3.7% to 319.6 million bbl, while distillate fuel oil inventories were nearly 13% higher.

Although gasoline inventories of 215.4 million bbl in June were down 2.4% from the "ample level" of a year ago, said API officials, they remained above average at midyear.

Meanwhile, US oil supplies increased during the first half of 2002 with added production from deepwater fields in the Gulf of Mexico and newly developed resources in Alaska.

Deepwater oil production in the gulf increased by 2.2% in June and by 1.5% for the full 6 months, compared with the same periods last year, officials said.

Alaska production surged by 10.7% to 1.04 million b/d.

US inventories—domestic production, deliveries, and imports—totaled 1.06 billion bbl in June, up 4.3% from a year ago.

Contact Sam Fletcher at [email protected]