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

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A tanker is being loaded at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. Picture taken May 21, 2018. REUTERS/Ahmed Jadallah

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HOUSTON, March 24 (Reuters) – U.S. refiners this month began seizing shipments of fuel oil from the Middle East after U.S. President Joe Biden banned imports of Russian oil following the invasion from Ukraine by country, according to shipping data.

Last year, the United States imported approximately 700,000 barrels per day (bpd) of various types of fuel oil and other feedstocks which primarily went to refineries on the US Gulf Coast to supplement heavy crude oil, according to market research data.

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

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Middle Eastern supplies are expected to account for at least 17% of U.S. fuel oil purchases in April, according to preliminary tanker tracking data Refinitiv Eikon.

US GULF COAST BUYERS

About 4 million barrels from Middle Eastern suppliers are expected to be spilled along the US Gulf Coast next month, the highest level in at least 12 years. For the whole 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 buys fuel oil,” said Kpler analyst Matt Smith. The United States could struggle to fill the void left by Russia, Smith said, given the loss of Russian fuel oil imports.

Saudi Arabia, Kuwait, Iraq and the United Arab Emirates account for about half of all fuel oil shipments under contract and are expected to head to the United States in April, according to the data. At least one cargo was to be unloaded in May.

Fuel oil imports from Mexico to the U.S. are also expected to increase in April, analysts said, but cargo tracking data has yet to show an increase as schedules from Mexico are typically very dynamic in because of short routes.

IRAQI BARRELS

The cargoes from the United Arab Emirates and Kuwait due to be unloaded in April would be the first for at least eight months, while March marks the first time that fuel oil from Iraq will arrive in the United States since mid-2021, according to data from Refinitiv.

US officials have pressured other oil suppliers to boost exports. Some diplomats met with Venezuelan officials this month about the possible return of Venezuelan heavy crude to the US Gulf Coast. Refiners have also reached out to Ecuador for additional heavy crude shipments.

“There could well be a game of musical chairs in the coming months as Russian fuel oil is redirected away from the United States and into the Middle East, while the Middle East sends more of it to the United States,” Smith said.

The United States gets less than 10% of its fuel and crude imports from Russia. Of this number, the largest share of imports consists of unfinished oils used by refiners to be transformed into other products.
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Reporting by Arathy Somasekhar in Houston; Editing by David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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