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US Crude Imports Pile Worries on Inventories

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US crude oil imports

On February 3, 2016, the EIA (US Energy Information Administration) reported that weekly US crude oil imports rose by 647,000 bpd (barrels per day) to 8.3 MMbpd (million barrels per day) for the week ending January 29, 2016.

The four-week US crude oil import level averaged 8 MMbpd for the same period, and the rise in US crude oil imports continued to add to rising US crude oil inventories (see Part 2 for this discussion). Consequently, US crude oil inventories broke a 34-year record.

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US crude oil import in 2014

Notably, the current four-week US crude oil import average is 7.8% higher than it was during the same period in 2014, and these record US crude oil imports are due to the historic low price of crude as well as to strategic ties between large independent US oil refiners like Valero Energy (VLO) and Phillips 66 (PSX) and Middle East countries. US refiners are also designed to take in more of the heavy crude oil, Brent crude, due to the abundance of Brent crude prior to record US crude oil production in 2015.

Gauging the impact

The consensus of rising US crude oil imports due to lower crude oil prices and heavy-refining design structure of US refineries will likely lead to a further rise in US crude oil inventories. This means that the US will start to export light crude oil produced in the US to teapot refineries and the new refineries that specialize in refining light crude. In this sense, the depressed oil market oil market affects US producers like Exxon Mobile (XOM), Chevron (CVX) and Hess (HES) more than the oil refiners like Western Refining (WNR), Alon USA Partners (ALDW), and Northern Tier Energy (NTI).

ETFs and ETNs such as the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the First Trust Energy AlphaDEX ETF (FXN), the Vanguard Energy ETF (VDE), and the VelocityShares 3X Long Crude Oil ETN (UWTI) are, of course, heavily influenced by the ups and downs in the oil market. But can this latest rise in the price of crude continue? Continue to the next and final part of this series to find out.

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