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U.S. Scoops up Overseas Fuel Oil in pre-IMO Push
The United States is taking advantage of record-low
prices of one of the world's dirtiest fuels by buying record
volumes, which it intends to upgrade into cleaner products before
new shipping rules take effect, trading and analyst sources
say.
U.S. trade sources said it recently had become economical to ship
fuel oil from countries such as Russia, boosting imports of the
product into the United States.
This comes even as prices for high-sulphur fuel oil (HSFO) on the
U.S. Gulf Coast trend lower while demand for high-sulphur fuels
sags globally.
Fuel oil in the region traded at $41.56 per barrel on Nov. 6, a
three-year seasonal low, data from S&P Global Platts shows.
Fuel oil prices in Europe have also fallen to record lows, which
has helped make exports to the United States economical.
According to data from oil analytics firm Vortexa, U.S. imports
of fuel oil from Russia and former Soviet Union (FSU) countries
surged to at least a multi-year high of 1.35 million tonnes in
October, and they are expected to hold firm at similar levels in
November.
"The broader rise in FSU-U.S. flows since the beginning of this
year has therefore helped to offset the impact of the collapse in
Venezuelan fuel oil imports in the wake of U.S.-led sanctions,"
Vortexa said.
Vortexa separately noted that the United States had received fuel
oil from Jordan at the end of October, with another tanker set to
arrive around the end of November. The route from Jordan to the
United States is unusual, Vortexa said.
New regulations on marine fuel by the International Maritime
Organization that take effect on Jan. 1 will restrict sulphur
content in shipping fuels to a maximum 0.5%, from 3.5% now.
Complex U.S. refiners have long been expected to benefit from the
new regulations because they have greater capability to break
down cheaper, heavy crudes into higher-margin, compliant
products.
They have vacuum distillation capacity to break down straight-run
fuel oil, which comes directly from a crude unit, as well as
coking capacity, which upgrades cracked fuel oil, a by-product
from complex refining methods.
The increased imports may be related to U.S. refiners looking to
run fuel oil directly to their cokers as the price of
high-sulphur fuel oil declines ahead of IMO 2020, said Sandy
Fielden, energy analyst at financial services firm Morningstar.
"If fuel oil is a good deal cheaper than crude, you can run it
direct to the coker to produce gasoline and diesel and increase
refinery returns," Fielden said.
"If it proves profitable then we should see more of it in the
coming months as HSFO prices fall."
By Ahmad Ghaddar and Stephanie Kelly
Nov 8, 2019
