U.S. Crude Imports May Fall as Gulf Prices Drop Below Brent

Jul 30, 2014 12:46 pm ET

July 30 (Bloomberg) -- U.S. crude imports may drop from last week’s two-month high as prices on the Gulf Coast, home to 51 percent of refining capacity, slipped below Brent.

Imports climbed 337,000 barrels a day in the week ended July 25, the Energy Information Administration reported today. Light Louisiana Sweet crude on the Gulf traded below Brent, benchmark for half of global oil trade, for a fourth day, according to data compiled by Bloomberg.

LLS surged $4.52 a barrel above Brent on July 23, the biggest premium in one year, as strong refinery demand depleted crude inventories in the Gulf region. For the past year, the grade averaged $4.26 cheaper than Brent. Refineries slowed their operation last week amid rising fuel inventories.

“This is a short-term reaction,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. “But it’s not going to hold. We have a surplus of light crude. Gasoline stocks are sufficient.”

Crude imports rose to 7.74 million barrels a day last week, the highest level since May 23, the EIA, the Energy Department’s statistical arm, reported. Shipments to the Gulf Coast, known as PADD 3, climbed 383,000 to 3.81 million.

Imports reached 6.47 million barrels a day in mid-May, the lowest level since 1997, as U.S. domestic production reduced dependence on foreign oil. Output reached the highest since 1986 as a combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies trapped in shale formations, including the Bakken in North Dakota and the Eagle Ford in Texas.

Prices Moving

LLS for immediate delivery rose 66 cents to $105.48 a barrel today, according to data compiled by Bloomberg. European Dated Brent slid 7 cents to $106.09. LLS averaged $2.45 a barrel more expensive than Brent last week.

Brent for September delivery slid 35 cents to $107.37 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate, the U.S. benchmark, fell 2 cents to $100.95 on the New York Mercantile Exchange.

Crude inventories in PADD 3 dropped to 196.9 million barrels in the week ended July 18, the lowest level since March. They climbed 447,000 barrels in the seven days ended July 25, the first weekly gain in one month.

U.S. refineries operated at 93.5 percent of their capacity last week, down from 93.8 percent the previous week.