U.S. refiners turn to Middle East for fuel oil after Russia import ban
U.S. refiners have begun snapping up fuel oil cargoes from the Middle East this month after U.S. President Joe Biden banned Russian oil imports over the country's invasion of Ukraine, shipping data showed.
The U.S. last year imported about 700,000 bpd of different types of fuel oil and other feedstocks that mostly went to U.S. Gulf Coast refineries to supplement heavy crude oil, according to market research data.
Russia last year accounted for just under half of U.S. fuel oil imports, Mexico for 20% and the Middle East about 5%, according to data from research firm Kpler.
Middle East supplies are set to make up at least 17% of April U.S. fuel oil purchases, according to preliminary Refinitiv Eikon tanker tracking data.
U.S. Gulf Coast buyers
About 4 MMb from Middle East suppliers are set to discharge along the U.S. Gulf Coast next month, the highest level in at least 12 years. For all of last year, they supplied a total of 13 MMb, according to Kpler.
"It's a clear sign that we're seeing a shift in where the U.S. is buying fuel oil from," said Kpler analyst Matt Smith. The U.S. could struggle to plug the gap left by Russia, Smith said, given the loss of Russia fuel oil imports.
Saudi Arabia, Kuwait, Iraq and the United Arab Emirates make up roughly half of all fuel oil cargoes under contract and expected to head to the U.S. in April, the data showed. At least one cargo was scheduled to discharge in May.
Imports of fuel oil from Mexico into the U.S. are also expected to rise in April, analysts said, but the cargo tracking data has not yet shown the increase as scheduling from Mexico is typically very dynamic due to short routes.
Iraqi barrels
Cargo from the United Arab Emirates and Kuwait due to discharge in April would be the first in at last eight months, while March marks the first time Iraqi fuel oil will arrive in the U.S. since mid 2021, Refinitiv data showed.
U.S. officials have been pressing other oil suppliers to boost exports. Some diplomats met with Venezuelan officials this month over the possible return of Venezuela's heavy crude to the U.S. Gulf Coast. Refiners also have reached out to Ecuador for additional heavy crude cargoes.
"There may well be a game of musical chairs in the months ahead, as Russian fuel oil is redirected away from the U.S. and to the Middle East, while the Middle East sends more to the U.S. instead," Smith said.
(Reporting by Arathy Somasekhar in Houston; Editing by David Gregorio)
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