During the first half of 2016, U.S. gross crude oil imports increased by 528,000 barrels per day (b/d), or 7%, compared to the first half of 2015. This increase reverses a multiyear trend of decreasing U.S. crude oil imports as a result of increasing U.S. production. East Coast crude oil imports, which are reported as imports to Petroleum Administration for Defense District (PADD) 1, were up the most, rising by 244,000 b/d (41%) compared with the first half of 2015. Crude imports increased in all other regions except the Rocky Mountain region (Figure 1).
On a national basis, shipments from Nigeria, Iraq, and Canada contributed most to increased imports. Imports from Nigeria, Iraq, and other members of the Organization of the Petroleum Exporting Countries (OPEC) rose by 504,000 b/d. Declining imports from Mexico, which fell 118,000 b/d, more than offset the increase in imports from Canada, limiting the overall increase of non-OPEC imports to less than 24,000 b/d (Figure 2).
Changes in crude oil price spreads, which may have been influenced by the lifting of U.S. export restrictions on crude oil in December 2015 as well as logistical factors discussed below, were a significant factor in the rise of U.S. imports during the first half of 2016. The narrowing differences between certain U.S. crudes and international benchmarks provided an incentive for increased imports by refiners in areas where imported crudes now had a delivered cost advantage relative to domestic crudes of comparable quality. Additionally, lower overall crude prices contributed to a decline in U.S. crude production from an average of 9.5 million b/d in the first half of 2015 to 9.0 million b/d in the first half of 2016, resulting in higher net crude oil imports.
Another factor affecting U.S. crude imports is a continued shift in crude oil logistics. The North Dakota Pipeline Authority reports that pipelines continued displacing rail in transporting Bakken crude, rising from a market share of roughly 35% at the beginning of 2015 to nearly 57% by June 2016, with rail inversely declining from roughly 60% to about 30%. Unlike crude by rail movements, which primarily transport Bakken crude to the East and West Coasts, pipelines primarily transport Bakken crude to refineries in the Midwest and Gulf Coast. Pipeline transportation is significantly less expensive than rail. As a result, logistical constraints and costs that had previously depressed wellhead crude prices were alleviated, reducing downward price pressure that had previously made Bakken crude especially attractive for certain refiners, particularly on the East Coast. This then shifted flows of Bakken crude oil to refineries in PADD 2 and PADD 3, where refineries in both regions continued to run at near-record rates for much of the first-half of 2016 contributing to increased product exports. In contrast to Bakken, competing light-sweet African barrels are taking advantage of an oil tanker glut that has pushed shipping rates near all-time lows, improving their price competiveness. In addition to falling domestic production and a relative decline in the competitiveness of midcontinent crude, U.S. refinery demand rose by 133,000 b/d, creating further opportunities for imports.
As a result of shifting price, supply, and logistical dynamics, East Coast (PADD 1) crude imports rose by 244,000 b/d (41%), nearly three-quarters of which were supplied by Nigeria. Nigerian production actually declined during the first half of 2016 due to elevated supply disruptions. However, falling U.S. production and increasing competitiveness for seaborne light sweet crudes into the East Coast more than offset lower production levels, enabling imports from Nigeria to displace crude received from the Midwest (PADD 2), which declined by half, or 200,000 b/d (Figure 3). As a result, imports from Nigeria—which had fallen from more than 1 million b/d in 2010 to only 7,000 b/d during the first half of 2015—were able to partially return to their former primary market in the East Coast, rising to 186,000 b/d during the first half of 2016.
In the Midwest, crude imports rose by 104,000 b/d (5%) during the first half of 2016 compared with the same time last year. Canada accounted for almost all of the increase despite wildfires in Alberta that disrupted production later in the second quarter. Canada is the largest source of crude oil imported into the United States and its heavy crude is particularly well suited for U.S. refiners in the Midwest and Gulf Coast.
Gulf Coast (PADD 3) imports increased 88,000 b/d (3%), with rising imports from Middle East and African countries offsetting declines from Latin America. Imports from Iraq increased by 142,000 b/d, more than the next four countries combined. Iraq’s production in 2015 rose by 700,000 b/d, enabling more of their production to be exported to the United States.
The Rocky Mountain (PADD 4) is the only region with declining imports during the first half of 2016, with volumes down by 24,000 b/d (9%). PADD 4 is relatively isolated from import infrastructure compared with other regions and imports have been entirely sourced from Canada for more than a decade, a trend that continued during the first half of 2016.
Imports to the West Coast (PADD 5) rose by 116,000 b/d (11%). Saudi Arabia, Canada, and Ecuador are the top three sources of PADD 5 crude imports, accounting for about two—thirds of crude oil imports into the region and about 86% of the region’s import growth during the first half of 2016.
U.S. average regular gasoline retail and diesel fuel prices increase
The U.S. average regular gasoline retail price rose two cents from the previous week to $2.25 per gallon on October 3, down seven cents from the same time last year. The Gulf Coast price rose four cents to $2.01 per gallon while the West Coast and Midwest prices each rose three cents to $2.68 per gallon and $2.17 per gallon, respectively. The East Coast price increased by less than one cent to $2.21 per gallon, and the Rocky Mountain price decreased by less than one cent to $2.24 per gallon.
The U.S. average diesel fuel price rose one cent from a week ago to $2.39 per gallon, down 10 cents from the same time last year. The West Coast and Gulf Coast prices each rose two cents to $2.66 per gallon and $2.25 per gallon, respectively. The East Coast price increased by less than one cent to $2.40 per gallon, while the Rocky Mountain price remained virtually unchanged at $2.47 per gallon. The Midwest price fell by a fraction of a cent and remained at $2.36 per gallon.
Propane inventories gain
U.S. propane stocks increased by 0.7 million barrels last week to 104.0 million barrels as of September 30, 2016, 3.7 million barrels (3.6%) higher than a year ago. Gulf Coast inventories increased by 0.3 million barrels, Rocky Mountain/West Coast and Midwest inventories each increased by 0.2 million barrels, and East Coast inventories increased by 0.1 million barrels. Propylene non-fuel-use inventories represented 2.6% of total propane inventories.
Residential heating fuel price survey begins this week
Beginning this week and continuing through the end of March 2017, prices for wholesale and residential heating oil and propane will be included in This Week in Petroleum, and on EIA’s Heating Oil and Propane Update webpage.
As of October 3, 2016, residential heating oil prices averaged $2.30 per gallon, which is 12 cents per gallon lower than at the start of last heating season. The average wholesale heating oil price for the start of the 2016—2017 heating season is $1.61 per gallon, 2 cents per gallon below the first week of the 2015—2016 heating season.
Residential propane prices entered the 2016—2017 heating season at an average of $1.99 per gallon, 1 cent per gallon more than at the start of last winter’s heating season. Wholesale propane prices averaged 63 cents per gallon, 7 cents per gallon higher than the first collection week in October last year.
Upcoming changes to Weekly Petroleum Status Report (WPSR)
As previously announced in This Week in Petroleum on September 14, EIA will no longer include crude oil lease stocks in commercial inventory data starting with WPSR to be published on October 13. To help readers prepare for this change, we have created a test site that contains csv and excel files reflecting the removal of lease stock data from our previously published weekly commercial crude oil inventories. To see this change, readers can look at Table 9, Tab 6, Columns C through I. Please see the notice of upcoming changes and the test schedule for more information.