The sources of US oil imports

The demand situation is quite complex in the tanker market. The US increased its crude oil imports by 5.8% to 9.3 mbd during the first 7 months of 2003 compared to the same period in 2002. Imports were also 0.8% above the record imports in 2001. Imports during the last two weeks of July were above 10 mbd, which has been the level for seven weeks so far in 2003.

Variations in imports to the US are very important to the tanker market, not only because the US is the largest importer in the world, but also because it matters so much whether the imports are taken from, for example, nearby Venezuela or far-off Saudi Arabia.

When looking at the OECD data on imports, the US takes its oil from a multitude of sources. According to the OECD import figures for April (which include crude oil, NGL and Refinery Feedstocks and which are different from the US EIA figures) the US took 3.1 mbd of crude oil from North American sources, 1.0 mbd from Europe, 3.27 mbd from the Middle East, 1.4 mbd from Africa, and 1.88 mbd from Venezuela/Ecuador.

According to OECD figures, in 1q2003, when Venezuela’s imports to the US were halved, this oil was either not replaced at all, or was replaced from ‘other’ countries rather then from the Middle East (see table below).

One of the most interesting figures today is the strong increase in imports from the Middle East which is boosting tonne-mile demand in the tanker market. In particular the imports from Saudi Arabia increased in April 2003 to 2.1 mbd compared to an average for 2002 of 1.7 mbd. Transportation of 0.4 mbd in a year from Saudi Arabia to LOOP would provide full employment for some 14 VLCCs, compared to 3 if the oil was to be taken from Puerto Miranda in Venezuela, where 9 aframaxes would probably be used instead.

OECD figures for US imports of crude oil, NGL and Refinery Feedstocks









N America
















Middle East








































Part of the reason for the US 5.5% (0.5 mbd) increased crude oil imports was the declining production of 1.4% (0.1 mbd) Jan-July 2003 compared to Jan-July 2002. Total crude oil stocks, commercial and strategic (SPR), have also been built up by more than 20 million tonnes of oil since the beginning of March. This represents some 70 VLCC loads. According to the Financial Times the Bush administration has said it wants to increase the oil in the SPR's caverns from the 1 August level of 612m barrels to 700m barrels to have emergency stocks available should one of its suppliers halt exports. The extra stored crude oil is also a way for the US to keep OPEC in check by releasing oil if the cartel pulls in the reins too tightly.

The situation in Venezuela is still unstable. According to the Financial Times, although oil production has recovered since the strike, present levels are unsustainable. Ali Rodríguez, the head of PDVSA, has said current output is 3.3m barrels per day (mbd), which is higher than before the stoppage. But most other sources, such as the US Energy Information Administration, put the figure at about 2.6 mbd (the IEA says 2.35 mbd May/June), below Venezuela's quota of 2.9 mbd agreed with OPEC.

The FT says that low investment means output is likely to drop in the months ahead. During the 1990s PDVSA invested about USD 6bn a year to maintain output capacity. Rafael Ramirez, the Energy Minister, said recently that PDVSA would invest USD 2bn this year, a third of the previous level. Because Venezuela has small, mature oil reservoirs, with especially heavy types of crude, high levels of investment are needed just to prevent 25% of output capacity from vanishing each year. Ramon Espinasa, consultant at Washington DC’s Inter-American Development Bank and formerly a PDVSA economist, said there were too few drilling rigs in Venezuela. To maintain a potential of 3 mbd, the country required 80-100 rigs in service. Since the end of last year there had been fewer than 40. "This is unsustainable," he said. "In the next 12 months production will fall."

The EIA projects the total 2003 US petroleum demand to increase by close to 0.15 mbd, or by 0.7%, to 19.91 mbd. Individual product patterns, however, are expected to vary widely. Demand for motor gasoline, the largest oil-based product, is projected to increase by 0.7% for the year as a whole.

Jet fuel markets, which were negatively affected by both the SARS epidemic and the Iraqi campaign, are likely to remain sluggish for the rest of the year. On the other hand, distillate fuel oil is projected to increase by 3.9 % this year, buoyed by the harsh weather during the first quarter. Residual fuel oil demand, bolstered by high space-heating demand during the first quarter and relatively high natural gas prices throughout the year, is projected to register an increase of 7.4%.

In 2004, the growth in total petroleum demand is projected to reach 0.44 mbd, or 2.2% growth, to average 20.35 million barrels per day. All the major products (except residual fuel oil) are expected to contribute to that growth.

Total world oil demand is projected to increase by 1.1 mbd, which is only 0.1 mbd more than in 2002, according to IEA. The demand increase is projected to come from the US (0.3 mbd), “other Asia” (0.2 mbd), and China (0.3 mbd).

But the US share of this growth is decreasing. In contrast with figures from the IEA, the latest figures from the US Energy Information Administration (EIA) indicate that the US share now represents just roughly one eighth of the total or just 0.15 mbd (down from two or three times that figure earlier this year). China and other non-OECD countries are expected to generate about half of the 2003 demand growth (0.5 mbd). Non-US OECD, which earlier this year was expected by the EIA to produce negligible oil demand growth, is now anticipated to show 0.35 mbd.

Less good news, at least from a tonne-mile demand point of view, is the EIA’s belief that OPEC producers will continue to lose market share, with non-OPEC production expected to grow by 1-1.3 mbd in 2003 and 2004, exceeding the 0.9 mbd growth seen in 2002. Most of this growth will come from Russia and the Caspian Sea region, says the EIA, with supplies from these regions expected to increase by more than 0.7 mbd this year alone.

Other non-OPEC increases include Africa (0.4 mbd) and Latin America outside OPEC (0.2 mbd). This does not leave anything for OPEC and will mean that 2004 will represent the third year of 1 mbd plus growth from non-OPEC countries. Brazil is expected to increase production considerably during autumn 2004 from a current level of some 1.6 mbd to about 2 mbd, reducing its import dependency. Angola is expected to experience a similar increase in production from the current level of 0.9 mbd to 1.2 mbd mbd end 2004. This means that the oil production in these two countries will on average be more than 3.2 mbd in 2005 compared to a current oil production of some 2.5 mbd. Ecuador is the third country expected to increase oil production considerably from the current level of 0.39 mbd to 0.51. All in all, more short(er) haul crude is coming on the market.

Contact:Erik Ranheim