Jump in US Crude Oil Imports to Reverse in March

The recent jump in US crude imports could reverse from March as major oil exporters start cutting production, Goldman Sachs analysts said in a note Friday.

The latest Energy Information Administration report found that US crude inventories surged in the week ended Feb 3 by 13.8 million barrels – the second largest weekly build up on record. However, the rise did not shock the market, since preliminary data from the American Petroleum Institute late had indicated an even bigger increase, CNBC reported.

Goldman Sachs attributed the recent jump to an increase in imports, especially those from the Gulf Coast. However, output cuts by the Organization of Petroleum Exporting Countries and other producing nations could reverse this trend.

"Given the relatively high compliance to the proposed cuts so far, we believe that this import channel will reverse from March onward," the analysts said in the note.

The analysts explained that the average crude transit time from the Persian Gulf to the US Gulf Coast is 47 days. With freight data showing a decline in vessel demand in January, this means arrival to the US should slow down by early March.

"As a result, we do not view the recent excess US builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness."

Goldman Sachs also noted that a key manufacturing indicator, the Purchasing Managers' Index, has continued to show strength globally since late-2016. This may support global demand and accelerate the rebalancing of the oil market.

The bank's global demand growth forecast is at 1.5 million barrels per day in 2017.