Supplier change: why did the United States increase oil imports from Russia to a maximum of six years?

Since the beginning of 2019, the United States has a record increase in imports of oil and petroleum products from Russia. This is evidenced by data from the US Energy Information Administration (EIA). From January to May, the monthly volume of deliveries of Russian raw materials to the States almost doubled and amounted to 17.43 million barrels. The value was the maximum since August 2013.

As the main analyst of BCS Premier Anton Pokatovich explained in a conversation with RT, in many respects Washington’s actions on the energy market are connected with geopolitical factors. So, after the introduction of sanctions against Venezuela, the States have deprived themselves of the opportunity to buy heavy oil in large quantities. Thus, the United States was forced to resort to the assistance of Moscow to preserve the efficiency of its refineries, the expert said.

Recall that in January, Washington imposed restrictions against the largest oil company in Venezuela - Petróleos de Venezuela, SA (PDVSA). In total, the United States blocked $ 7 billion in assets of the corporation, and by the end of 2019, PDVSA’s loss of profits from the restrictions is expected to be about $ 11 billion. As a result, according to EIA, since the end of May, the United States has completely stopped buying oil from Caracas.

“Part of the American oil refineries, focused on Venezuelan high-sulfur crude oil, were left without raw materials after the actions of the US government. In order to compensate for losses from idle time, it was decided to purchase a Russian Urals with similar characteristics, which led to an increase in Russian oil imports to the States, ”said Yevgeny Udilov, head of the education department at the Phoenix Institute for Trading and Investment.

Analysts explain the need for imports from Russia by the fact that shale oil produced in the United States is light and not suitable for the production of certain types of fuel and chemical products. Thus, according to Dmitry Inogorodsky, an expert of the International Financial Center, traditionally, heavy fuel oil is used to obtain fuel oil, bitumen and other substances necessary for asphalt, automobile tires or heating of industrial premises.

According to Anton Pokatovich, in the current conditions, the United States will not be able to establish its own production of heavy hydrocarbons in a short time. Against this background, according to the analyst, the United States imports of Russian raw materials may further increase over the next few years.

“In our opinion, in the next two years, the United States is unlikely to be able to abandon the search for suppliers of heavy grades of oil, since the re-equipment of plant capacity requires very large-scale both time and financial resources,” the analyst added.

OPEC aside

It is curious that simultaneously with the increase in purchases from Russia, the United States is record-breaking in reducing oil imports from Saudi Arabia - one of Washington’s leading partners in the global energy market. According to the EIA, from January to May, the corresponding volume of deliveries was halved - to 452 thousand barrels per day. The last time a similar indicator could be observed in the middle of 1987.

Moreover, from January to May 2019, the level of US oil imports from OPEC member states averaged about 56 million barrels per month. According to the EIA, the value has been low for the last 26 years.

According to Anton Pokatovich, if the States are forced to compensate for the lack of Venezuelan oil with purchases from Russia, then the United States can already replace the raw materials with its own production.

“Such a change in the structure of American oil imports has become possible due to the fact that Saudi oil for the most part is not technologically indispensable for the United States in comparison, for example, with the heavy hydrocarbons produced in Venezuela,” the expert explained.

At the same time, analysts attribute the reduction in oil supplies from OPEC to the United States to the decline in production inside the cartel itself. Recall that in order to balance the global energy market of the country - members of the Production Freeze Pact (OPEC +), we agreed from January 1 to reduce the volume of oil produced by 1.2 million barrels per day from October 2018.

According to OPEC materials, in the first six months of 2019, the organization’s countries reduced oil production by almost 1.8 million barrels per day - to 29.83 million barrels per day.

As Irina Lanis, a financial analyst of FinIst, explained in an interview with RT, the actions of OPEC members on balancing the market lead to an increase in the cost of energy in the world. At the same time, according to the expert, the United States, by abandoning oil from the Middle East, artificially reduces global demand for hydrocarbons and thus wants to reduce the cost of raw materials and manipulate prices.

According to Dmitry Ingorodsky, in this way Washington is trying to exert political pressure on the states of the region.

“In case of negotiations on various issues, the states will be able to use the argument on the return of the volume of oil purchases from Saudi Arabia or from other countries of the region in exchange for certain preferences,” the expert noted.

At the same time, according to analysts, against the background of US actions, Saudi Arabia has already begun to reorient its exports towards Asia. So, according to the latest EIA data, in March Riyadh supplied Beijing about 1.7 million barrels per day. As follows from the materials of the organization, the rate was the highest since 2004.