Is United State cutting crude oil import from Saudi Arabia as part of new foreign policy?

The United States didn’t import any Saudi crude last week for the first time in 35 years. One can still recall that In May and June 2020, Saudi deliveries to the US had more than doubled from a year ago. The US refiners received the final installment of that bumper load in early July 2020.

Since then, Saudi oil shipments to the US have steadily declined. In November and then again in December, they delivered only 73,000 barrels a day to customers, preliminary US Energy Information Administration data show.

Eliminating the reliance on Middle East oil has been the dream of every US Administration since the presidency of Jimmy Carter in 1977. Just 12 years ago, when Joe Biden became US Vice-President, American refiners were routinely importing about one million barrels a day of crude from Saudi Arabia, the second-largest supplier to the US after Canada and seen as a major security risk.

Just three presidential terms later, that flow has fallen to zero. It is the most visual manifestation of how little; the US now relies on Middle East oil, after shaping its foreign policy for decades around its need for crude. If this abstinence from Saudi oil continues, it would weaken the economic, political and military links that have defined relations between Riyadh and Washington for decades.

The lack of deliveries follows a slump in crude shipments to the US. Since tankers from Saudi Arabia take about six weeks to reach import terminals on either the west or Gulf coasts, the drop is only starting to show up now. This is the first week America had no deliveries based on available weekly data through June 2010 from the US Energy Information Administration. A longer history of monthly figures shows this is the first time there were no Saudi imports since September 1985.

While the US imports of Saudi oil hitting zero is historic, it is likely this is temporary and only a deviation given the current low refinery runs and deep Saudi production cuts that are going to increase, against the backdrop of the ongoing pandemic environment. The US is still in the grip of the pandemic, with record infections in many states forcing new restrictions. The US gasoline consumption plunged to the lowest in years during the usual high-demand Thanksgiving and Christmas holiday periods.

The demand loss is so acute that some of the US refineries have been idled. Throughput is still below where it was before the crisis because of reduced domestic demand.

For Saudi Arabia, cutting shipments to the US is the quickest way to signal to the wider market that it’s tightening supply. The government is alone in publishing weekly data on crude stockpiles and imports, which carry enormous influence among oil traders. Other big petroleum consuming nations, like China, publish less timely information about oil supplies.

In the short term, the election of Joe Biden could benefit Saudi Arabia. While transitioning away from hydrocarbons would have a long-term impact on oil demand, hopes to revive the 2015 Iranian nuclear deal would pave the way for more Iranian oil to flow globally. Those sales will displace Saudi oil and that would mean Arabia would have to turn to the US to maintain sales.