Though the United States produces almost 12 million barrels of oil a day, complex Gulf Coast refineries need heavier crude grades to produce diesel and other high-margin products, and can not simply sub in light crude.
Oil rose on Thursday, shaking off persistent concern about the outlook for demand after the United States government said it could impose sanctions on OPEC member Venezuela's crude exports. EIA's weekly report showed that USA imports from Saudi Arabia fell by more than half from the previous week to 442,000 barrels per day (bpd).
Analysts said oil remains under pressure amid growing concerns about a slowdown in global economic growth.
According to EIA, U.S. crude oil refinery inputs averaged 17.0 million barrels per day last week, 174,000 barrels per day less than the previous week's average.
Washington on Thursday signaled it could impose sanctions on Venezuela's crude exports as Caracas descends further into political and economic turmoil. However, it has not yet taken that step, nor has it elected to cut off supply of US oil that goes to Mexico. US crude futures were modestly higher, however, causing the refining margin, or crack spread, for gasoline RBc1-CLc1, to fall by 5 percent.
Still, some analysts said the possibility of immediate sanctions were unlikely.
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The European Union is expected to launch a mechanism that would facilitate nondollar trade with Iran, circumvent US sanctions, Reuters reported Wednesday , citing comments from diplomats. They've come to rely on the cheap and extra heavy crude found in Venezuela.
"The stock market probably responds mildly", Fitzmartyn said. The Trump administration has drafted a slate of potential restrictions on Venezuelan crude exports but hasn't decided whether to deploy them, according to people familiar with the matter.
The International Monetary Fund reports that the country's GDP has fallen by 37 percent in the last few years with inflation in danger of running beyond 10 percent this year.
Oil prices fell roughly 2% Tuesday as financial markets were hurt by concerns about a global economic slowdown, and the losses scared investors into assets considered safe, such as government bonds or gold.
Analysts also pointed to a surprise increase in USA crude stocks after refineries cut output, according to industry data. Indeed, that has happened already, especially as production caps in Canada's oil sands have also limited another source of heavier barrels.
"It's certainly not a bad thing for Canadian heavy crude producers to have a competitor in a market like the U.S. Gulf Coast potentially go away", said John Auers, executive vice-president at energy consultant Turner Mason & Co.in Dallas. While a cutoff of Venezuelan imports would raise prices for refiners in the Gulf Coast, the market is competitive enough that producers are unlikely to pass along much of the cost to consumers, experts said. The country sends 41 percent of its oil exports to the U.S. Critically, U.S. refiners are among the few customers that pay cash to Venezuela for its oil.