U.S. refiners are scooping up cheap high-sulfur fuel oil for processing from Russia and the Baltic states as they take advantage of new shipping rules that have cut demand for the dirtier marine fuel, according to oil traders and shipping data, Reuters reported.
U.S. refiners Valero Corp., Chevron Corp. and Phillips 66 have been buying HSFO, traders said, taking advantage of their complex operations to turn HSFO blended with crude oils into products like diesel, gasoil and gasoline.
This month, 2.2 million tonnes of fuel oil, largely from Russia and the Baltic states, will arrive in the United States, highest in at least three years, according to oil analytics firm Vortexa Ltd. Two-thirds of the total is Russian in origin, its data shows.
New maritime rules known as IMO 2020 mandate that the shipping industry has to burn cleaner, low sulfur fuels in tankers. The rules, which took effect Jan. 1, have clipped demand for marine fuels such as high-sulfur fuel oil. The surplus marine fuel is becoming a salve for refiners, according to traders, who have seen margins drop sharply due to weak global demand for refined products like diesel and gasoline.
Valero did not reply to requests for comment. Chevron and Phillips 66 declined to comment.
HSFO sold for $39.55 per barrel on the U.S. Gulf Coast on Wednesday, down 30% from a year ago, according to price tracker S&P Global Platts. January U.S. imports are expected to be 54% greater than December’s, according to Vortexa.
Reporting by Julia Payne in London and Collin Eaton in Houston; Editing by Tom Brown
