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Rising US Crude Oil Imports Support the Refined Products Glut



US crude oil imports 

Yesterday, the EIA (U.S. Energy Information Administration) stated that weekly US crude oil imports rose by 678,000 bpd (barrels per day) to 8.2 MMbpd (million barrels per day) for the week ending January 8, 2016. The four-week average for crude oil imports is 7.7 MMbpd. The current four-week average for US crude oil imports is 4.7% more than last year’s level. Rising US crude oil imports suggest that the refined products glut will continue over the long term. Global oil price wars and discounted Brent oil could also motivate US oil refiners like Phillips 66 (PSX), Tesoro (TSO), and Valero Energy (VLO) to import more crude oil.

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US crude oil imports and their impact 

In the fourth part of this series, we saw that US gasoline and distillate inventories are at peak levels. The rise in the refined products inventory will put pressure on oil prices. The United States will continue to increase its imports because most of its refineries use heavy crude oil rather than the light crude oil produced domestically. The rise in supply will lead to a rise in inventory, which will likely extend the bearish phase of the global oil market.

The lower oil prices will affect national and international oil companies like BP (BP), Total (TOT), Petróleo Brasileiro SA Petrobras (PBR), Royal Dutch Shell (RDS.A), Eni (ENI), ExxonMobil (XOM), and Chevron (CVX). Falling oil prices will also put pressure on broader indexes like the SPDR S&P 500 (SPY) and on ETFs and ETNs like the Fidelity MSCI Energy Index ETF (FENY), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

In the next part of this series, we’ll explore the latest crude oil price forecasts.


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