Legacy of Saudi-Russian volume war should not disrupt long-term rebalancing effortsWhile adding near-term pressure to a US sector that is bearing the brunt of an industry-wide financial squeeze, Reuters analyst John Kemp believes the deluge of Saudi crude flooding into the country will not deal too much damage to the global effort to restore stability to oil markets that have been thrown into disarray by the onset of coronavirus.He says: “If these imports are part of a one-off wave – the legacy of the volume war between Saudi Arabia and Russia fought in late March and early April – they will not change the picture of a market rapidly rebalancing.“Domestic crude production was estimated to have fallen again last week to just 11.4 million bpd, slowing sharply from more than 13 million bpd at the beginning of March.“Crude inventories around the Nymex WTI delivery point at Cushing in Oklahoma fell by more than three million barrels last week, the third consecutive draw, with stocks now down by a total of 12 million barrels.“Cushing storage is now 68% full, down from a peak of 83% at the start of May. Local tank farms have spare capacity to store up to an extra 25 million barrels if needed.“But it may be some time before anxiety among futures traders about deliverability is assuaged and they are confident to trade the front-month contract again.” While the Saudi-Russian price war might have been on hold since the early-April Opec+ deal to slash global output, the repercussions of the short-lived production binge have now sailed their way into the US market.Before Riyadh and Moscow settled their differences to agree on deep cutbacks that have gone some way to stabilising the global oil market in recent weeks, state-backed Saudi Aramco confirmed it was raising production levels to a huge 13 million barrels per day, as the Kingdom sought to wrestle market share from its competitors by flooding key markets with cheap crude.Many of those barrels were loaded onto a fleet of oil tankers destined for the US, which, after a long voyage across the seas, have now started to arrive in the country, unloading cargoes of discount Saudi crude ready to compete with domestic products. Oil tankers that left Saudi Arabia during the price war have started arriving in the US At a time when many US oil producers are holding back production due to the low-price environment triggered by the coronavirus market crash, millions of barrels of Saudi crude imports have started arriving on its shores. NS Energy takes a closer look at how the effects of Riyadh’s volume war are finally catching up with the US oil industry. US crude oil imports increased nearly 40% in a weekLatest data from the US Energy Information Administration shows overall US crude oil imports were 7.2 million bpd in the week ending 22 May – a sharp increase of two million bpd compared to the previous week, around half of which came from Saudi sources.The influx of new imports adds unwelcome strain to storage inventories, which, after the Cushing scare in April that sent West Texas Intermediate (WTI) plummeting into negative pricing for the first time, have been gradually easing as production curtailments take effect.According to the EIA figures, total stocks of crude oil and petroleum products – not including the national strategic petroleum reserve – grew by almost 15 million barrels during the week to a record 1.41 billion barrels.Inventories of crude oil, which have been in decline throughout May as domestic production shut-ins have become prevalent, grew by around 1.5% week-on-week to 534 million barrels – a level 13% above the five-year average for this time of year. Millions of barrels of Saudi crude oil imports, produced at the height of the March price war have reached the US market, exacerbating domestic industry woes US oil production falling as operators hit pauseThe Saudi oil dump comes at a time when many US shale operators are under extreme financial pressure amid the low-price environment, with bankruptcies in the sector a very real possibility unless reports of a federal lifeline in the form of royalty discounts can prove enough to ease the strain.Last week, the International Energy Agency reported that US shale is poised to undergo a 50% reduction in investment activity this year, as the appetite for capital spending dries up amid the crisis.US operators have resorted to shutting in production as the persistence of low prices – despite a moderate rebound for WTI in recent weeks – makes higher levels of production economically unviable.According to the EIA, US crude oil production stood at 11.4 million bpd last week, having peaked at 13 million bpd as recently as March, and with cheap Saudi crude now sloshing around the market, US oil producers could be feeling the heat for some time to come.