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

March 24, 2022 at 8:59 pm

Oil field in Basra, Iraq on 17 April 2017 [HAIDAR MOHAMMED ALI/AFP via Getty Images]

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

The United States, last year, imported about 700,000 barrels per day (bpd) of different types of fuel oil and other feed stocks that mostly went to US Gulf Coast refineries to supplement heavy crude oil, according to market research data.

Russia, last year, accounted for just under half of US fuel oil imports, Mexico for 20 per cent and the Middle East about 5 per cent, according to data from research firm, Kpler.

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

US Gulf coast buyers

About 4 million barrels from Middle East suppliers 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, according to Kpler.

“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 United States 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 United States in April, the data showed. At least one cargo was scheduled to discharge in May.

Imports of fuel oil from Mexico into the United States 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 United States since mid- 2021, Refinitiv data showed.

US 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 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,” Smith said.

READ: Saudi oil exports increase by 57.7% since January