Market disruptions and overseas storage that is at or near capacity have pushed crude imports up 20% from a year ago

By  Christian Berthelsen And Lynn Cook May 3, 2016 5:21 p.m. ET  wsj.com

The U.S. is importing more foreign crude than it has in years, becoming one of the last ports of call for many oil-producing nations despite a glut of crude from domestic companies.

Oil imports this year have surged 20% to about eight million barrels a day since early May 2015, when they approached a 20-year low, according to federal data. Crude from the Republic of Congo, Russia and Brazil is arriving at U.S. ports, while Canada is sending a record amount of oil to the U.S., the data show.

A series of market disruptions in recent months is one reason for the sharp rise in imports, even though U.S. production is close to a three-decade high at nearly nine million barrels a day. These changes include Iran’s return to exporting crude after sanctions were lifted in January, a move that indirectly led to more U.S. imports even though Iran itself can’t sell to the U.S.

Another big driver: The rest of the world is running out of places to store oil. Facilities from Rotterdam to Cape Town already are near capacity, but the U.S. still has room to spare, said Brian Busch, director of oil markets for Genscape, a data firm that tracks energy shipments.

The U.S. has filled about two-thirds of its total storage capacity and has room for roughly 100 million barrels more, Mr. Busch said. By comparison, major storage hubs in China and South Africa appear full, and Europe’s main storage space centered in Rotterdam appears to be within 10% of its usable capacity, according to Mr. Busch.

But with more crude heading to the U.S., the states are moving closer to full storage capacity, too, said Skip York, a vice president with Wood Mackenzie, an energy consultant.

As U.S. tanks fill, “it will eventually have to put some downward pressure on U.S. prices,” Mr. York said. Even before then, the raft of new supply from overseas could weigh on U.S. oil prices.

On Tuesday, oil for June delivery fell $1.13, or 2.5%, to settle at $43.65 a barrel on the New York Mercantile Exchange, on expectations that U.S. crude inventories will keep climbing. Crude is up 67% from a 2016 low hit in February but down 28% from a year ago.

Still, rising imports isn’t bad news for everyone in the oil patch. Traders that can afford to hold oil and lock in higher sales through the futures market are big beneficiaries.

Refiners like Phillips 66, major energy companies like BP PLC and international trading houses like Mercuria Energy Group are storing foreign crude in the U.S. so they can sell it for a profit later, according to federal data.

Socking away oil in American storage can cost between 30 cents and 85 cents a barrel each month, which is well below the $1 a barrel or more it takes to keep crude floating in oil tankers, observers said.

“That’s precisely why some of these traders import it, to put it in storage,” said Amrita Sen, co-founder of Energy Aspects, a London consulting firm.

A Wall Street Journal analysis of U.S. Energy Department numbers shows nearly 114 million barrels of foreign oil entered the U.S. between May 2015 and February and went to storage tanks. The majority is parked in Oklahoma and Illinois. That figure is up 30% from less than 88 million barrels in the same period a year earlier.

Meanwhile, wait times to deliver foreign crude into the U.S. have become so backlogged that more than 28 million barrels of oil are sitting idle on tankers in the Gulf of Mexico, according to ship-tracking firm ClipperData. That figure is more than double the normal level, ClipperData said.

Storage space isn’t the only reason for the U.S. import boom. Countries like Venezuela and Iraq are selling oil for low prices just to keep pumping, observers said, and Iran is ramping up exports.

U.S. refiners still are prohibited from buying Iranian oil, but crude from the Persian Gulf country going to other destinations has unleashed a chain reaction that is causing more oil to flow into the U.S.

Iran has been underpricing many of its competitors to win back market share. That means some countries that got cut out of business in Europe and Asia because of lower-priced Iranian crude are selling to the U.S. market, traders and analysts said.

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