Petroleum Imports Surge to 7-Year High; Oil Prices Plummet

U.S. petroleum imports surged in July to their highest level in more than seven years because of rising oil demand and a sharp drop in domestic crude oil production, the American Petroleum Institute reported Wednesday.

Mounting tensions in the Persian Gulf oil channel to the West also spurred U.S. purchases of foreign petroleum, the oil industry trade group said.

Meanwhile, oil prices tumbled again Wednesday after a one-day breather, buckling under continued market pessimism--despite the API report--about the world’s ability to absorb current output levels of crude and refined products.

Trading was heavy on the New York Mercantile Exchange, where contracts for September delivery of West Texas Intermediate, the benchmark U.S. crude oil, closed at $19.63, down 27 cents from Tuesday, when it had risen 7 cents from Monday’s 74-cent plunge to $19.83.

Until then, the near-month contract had not closed below $20 since June 25, when it settled at $19.64 a 42-gallon barrel. The near-month contract peaked at $22.39 a barrel July 17.

Jayne Ball, a commodity broker at the Dean Witter Reynolds securities firm, said the day’s trading volume was “dramatically higher” than usual. About 91,000 crude oil contracts changed hands, she said, compared to recent averages of 50,000 to 60,000 contracts a day.

The institute said the United States, the world’s largest oil-consuming nation, imported 45% of its oil needs in July. The nation’s imports of crude oil and petroleum products shot up 10.7% to 7.62 million barrels a day in July from 6.89 million barrels a day in the same month last year.

“Though higher demand and lower domestic production account for the largest part of July’s recent-year record for imports, heightened tensions in the Persian Gulf and the ready availability of crude and (refined) products have also contributed to the increase,” the group said.

U.S. oil demand continued to expand in July, climbing 2.5% to 16.71 million barrels a day from 16.30 million barrels a day in July, 1986.

Demand for gasoline went up 2.4% to 7.61 million barrels a day last month--a rate that exceeded many analysts’ projections--from 7.43 million barrels a day in the same month last year.

The average U.S. pump price has increased by nearly 15 cents a gallon since last July, but the API said prices still are relatively low and, on an inflation-adjusted basis, are about equal to the period before the 1973-1974 Arab oil embargo.

Prices for refined products on the mercantile exchange also plummeted Wednesday. September contracts for wholesale unleaded gasoline dropped 0.66 of a cent to 50.81 cents a gallon, while wholesale heating oil fell 0.58 of a cent to 51.15 cents a gallon.

Concern over an apparent glut of oil supplies on the world market continued to be the main reason for the drop in prices, analysts said. Various estimates place the amount of that overproduction by members of the Organization of Petroleum Exporting Countries between 1 million and 2.5 million barrels a day over its official daily quota of 16.6 million barrels.

Late Tuesday, API reported that domestic crude inventories rose by 1.1 million barrels last week, to 324.3 million barrels. Distillate stocks--which include heating oil--were up 4.3 million gallons to 119.4 million gallons.

While unleaded gasoline supplies were down by 1.7 million barrels, to 227.2 million barrels, production jumped from 6.7 million gallons to 7.2 million gallons daily.