U.S. Gulf Coast fuel oil imports hit 2.5-yr high amid Venezuelan, Russian sanctions
- Saudi Arabia, Iraq and Kuwait drive Mideast Gulf fuel oil imports to record highs in August and September
- Refiners seek alternatives to dwindling Venezuelan crude supplies
- S. residual fuel oil stocks fall since sanctions on Russian oil
Fuel oil imports to the U.S. Gulf Coast surged to a two-and-a-half-year high in September, driven by a jump in cargoes from the Middle East, as refiners seek alternatives to dwindling Venezuelan crude supplies, according to preliminary ship tracking data, analysts and a refinery source.
U.S. Gulf Coast refiners are ramping up fuel oil imports to fill a widening gap left by declining heavy crude supplies, particularly from U.S.-sanctioned Venezuela.
Meanwhile, domestic fuel oil stocks have been in decline after the U.S. sanctioned Russian crude and oil products following its invasion of Ukraine in 2022, cutting off a key fuel oil supplier and forcing refiners to find alternative barrels.
Fuel oil imports into the U.S. Gulf Coast, home to more than 55% of total U.S. refining capacity, have been on the rise since July and were on track to reach 541,000 bpd last month, marking their highest since February 2023, according to Kpler.
In August and September, fuel oil imports from Gulf countries hit record highs, bolstered by volumes from Saudi Arabia, Iraq and Kuwait, per Kpler.
Shipping Iraqi high-sulfur fuel oil to the U.S. Gulf Coast on Suezmax tankers has been economically viable since early July, according to Sparta commodity owner Hoa Nguyen, referring to tankers that can ship up to a million barrels.
The end of the power generation season in the Middle East has also freed up more high-sulfur residual fuel oil barrels to meet strong demand on the U.S. Gulf Coast, Nguyen added.
"In short, there is way more availability of high-sulfur residuals right now, which the U.S. refining system is hungry for and which will help boost the diesel yield there," Nguyen said.
A drop in available crude supplies from Venezuela and more available fuel oil from the Mideast, coupled with strong product margins have led some U.S. Gulf Coast refiners to run more fuel oil in the last couple of months, according to a refinery source.
Gulf Coast refineries are designed to process heavy, sour crude, qualities typical of Latin American grades. When those supplies tighten, refiners can pivot to fuel oil, which secondary units can process into higher-value products like gasoline and diesel.
Crude imports to the refining hub have been in decline since July, falling 143,000 bpd on the month to just 880,000 bpd in September, according to preliminary Kpler data, their lowest since November 2022.
U.S. crude imports from Venezuela fell to 6,000 bpd in July, according to the U.S. Energy Information Administration (EIA), following the South American country's cancellation of cargoes to U.S. producer Chevron, ahead of a deadline set by the Trump administration to wind down oil transactions.
The Chevron authorization was reinstated with restrictions in late July but volumes have yet to recover, with weekly U.S. imports totaling just 49,000 bpd last week, compared with the 2025 high of 416,000 bpd in January, per EIA data.
"This has deprived U.S. Gulf refiners of precious heavy crude supplies, forcing them to turn to residual imports," said Roslan Khasawneh, senior oils analyst at Kpler.
Weekly U.S. residual fuel oil stocks fell 487,000 bbl last week to 20.63 MMbbl, compared with 29.2 MMbbl in the same week in 2021, prior to Russia's invasion of Ukraine, according to EIA data.
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