U.S. scoops up overseas fuel oil in pre-IMO push
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[November 08, 2019] By
Ahmad Ghaddar and Stephanie Kelly
LONDON/NEW YORK (Reuters) - 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.
Graphic: Gulf Coast HSFO prices sink to 3-yr seasonal low png,
https://fingfx.thomsonreuters.com/
gfx/editorcharts/USA-PRODUCTS/0H001QXHK9BR/
eikon.png
![](http://archives.lincolndailynews.com/2019/Nov/08/images/ads/current/chicagost_sda_FFARM_2018.png)
Fuel oil prices in Europe have also fallen to record lows, which has
helped make exports to the United States economical.
Graphic: European high-sulphur fuel oil barge prices png,
https://fingfx.thomsonreuters.com/
gfx/editorcharts/OIL-PRODUCTS-FUELOIL/
0H001QXHM9BY/eikon.png
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.
Graphic: U.S. Gulf Coast fuel oil imports by region png,
https://fingfx.thomsonreuters.com/
gfx/editorcharts/OIL-PRODUCTS-FUELOIL/
0H001QXHP9C4/eikon.png
"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.
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![](../images/110819pics/busine25.jpg)
A general view shows the Novorossiysk Fuel Oil Terminal (NMT) in the
Black Sea port of Novorossiisk, Russia May 30, 2018. Picture taken
May 30, 2018. REUTERS/Natalya Chumakova
![](http://archives.lincolndailynews.com/2019/Nov/08/images/ads/current/bennett_lda_123015.png)
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."
(Additional reporting by Laura Sanicola in New York; Editing by Dale Hudson)
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