US refiners turn to Middle East for fuel oil after Russia import ban

Middle East supplies are set to make up at least 17% of April US fuel oil purchases

Fuel prices at a Shell gas station in the International District in Seattle on March 9. Prices have surged after the US and UK banned Russian oil imports. Bloomberg

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US refiners began snapping up fuel oil cargoes from the Middle East this month after President Joe Biden banned Russian oil imports over the country's invasion of Ukraine, shipping data showed.

Market research showed that tast year, the US imported about 700,000 barrels per day of different types of fuel oil and other feedstocks that mostly went to US Gulf Coast refineries to supplement heavy crude oil.

Russia last year accounted for a little under half of US fuel oil imports, Mexico for 20 per cent and the Middle East about 5 per cent, research firm Kpler reported.

Middle East supplies are set to make up at least 17 per cent of April US fuel oil purchases, preliminary Refinitiv Eikon tanker tracking data have shown.

About four million barrels from suppliers in the Middle East are set to discharge along the US Gulf Coast next month, the highest level in at least 12 years. For all of last year, they supplied a total of 13 million barrels, Kpler said.

“It's a clear sign that we're seeing a shift in where the United States is buying fuel oil from,” said Kpler analyst Matt Smith. The US could struggle to plug the gap left by Russia, Mr Smith said, given the loss of Russian fuel oil imports.

Saudi Arabia, Kuwait, Iraq and the UAE make up about half of all fuel oil cargoes under contract and expected to head to the US in April, the data showed. At least one cargo was scheduled to discharge in May.

Imports of fuel oil from Mexico to the US 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.

Cargo from the UAE and Kuwait due to discharge in April would be the first in at least eight months, while March marks the first time Iraqi fuel oil will arrive in the US since mid 2021, Refinitiv data showed.

US officials have been pressing other oil suppliers to boost exports. Diplomats met Venezuelan officials in Caracas this month over the possible return of Venezuela's heavy crude to the US 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 US and to the Middle East, while the Middle East sends more to the US instead,” Mr Smith said.

Updated: March 25, 2022, 2:55 AM