In the LOOP: US imports fewer heavy sour crudes, despite supply crunch

Despite receiving fewer barrels of crude oil from Venezuela, US Gulf Coast refineries and terminals, including the Louisiana Offshore Oil Port, have not started to import more heavy, sour crudes from other markets.

On January 28, the US imposed sweeping sanctions on Venezuelan state PDVSA, which analysts widely expected would drastically cut US imports of Venezuelan crude and cause US refiners to seek alternative barrels from other Latin American countries and the Middle East.

However, while USGC refiners have cut Venezuelan crude imports, as expected, they have not made corresponding increases in imports of heavy, sour crudes from other markets, according to the latest US Commerce Department import data. And, the data shows, overall US imports of all foreign crudes by vessel has fallen sharply in the nearly two-month period since the PDVSA sanctions were put into place.

Since imposing sanctions on Venezuela, US imports of crude by vessel have averaged about 3.25 million b/d, compared to 4.26 million b/d over the same two month stretch in 2018 and 4.52 million b/d over that time period in 2017, according to Commerce data.

Since PDVSA sanctions were imposed, US imports of Venezuelan crude have fallen to an average of about 185,200 b/d, eventually dwindling to zero. The US has not imported Venezuelan crude since March 9, according to US Customs data and S&P Global Platts Analytics.

Even without sanctions, US imports of Venezuelan crude have been falling steadily for years, but averaged about 420,100 b/d over the same two-month stretch last year. While Venezuelan imports have plummeted, US imports from other countries have yet to surge, Commerce data shows.

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US imports of Mexican crude, for example, averaged about 645,200 b/d over the two-month stretch since sanctions were imposed, down more than 39,000 b/d from the same timeframe last year, and imports of Saudi crude averaged about 640,000 b/d, down about 62,000 from the same stretch last year.

Imports of Iraqi crude, one of the suppliers analysts expected might fill the gap created by the loss of Venezuelan crude, fell below 314,600 b/d, less than half the amount imported over the same time a year ago.

At LOOP, a terminal designed to take in mostly heavier, sour crudes, the drop in Venezuelan and Saudi Arabian crudes imports has been more dramatic, with zero cargoes recorded for both countries so far this year. Imports of Iraqi grades also plummeted to 2 million barrels in the post-Venezuelan sanctions period, from nearly 10 million barrels in the same period of 2018, according to US Customs Bureau data.

US Gulf looks south for make-up volumes

However, there is some indication that the Latin American crudes have stepped in to take the place of missing Venezuelan and Middle Eastern barrels, in part. Latin imports to the LOOP remained slightly higher so far this year, despite the supply tightness of heavy-sour crudes produced by Mexico and Colombia and some seasonal turnarounds.

The total volume of Latin grades imported at LOOP totalled 1.7 million barrels from February 1 to March 25. That's compared with 1.4 million barrels in the same period of last year, Platts data showed.

Last week, Pemex raised for the first time its K factor of constant terming for its formula pricing for April Maya deliveries to Asia, after dropping it for three consecutive months. The price hike was attributed to a spike in buying interest from Asian refiners due to the sanctions on Venezuelan and Iranian crudes.

US Gulf Coast refiners' weakened appetite for foreign crudes could be an indication that more refineries are taken in domestically available crudes, including light sweets produced in major US shale basins.

The dip in imports also coincides with planned turnarounds including work being done at ExxonMobil's 505,200 b/d Baton Rouge refinery, which scheduled to restart at the end of the month. Valero's 215,000 b/d St. Charles refinery also undergoing maintenance most of February.