U.S. West Coast Refiners Tap Malaysian Supply
A cargo of fuel oil from Malaysia is making its way to a refinery on the U.S. West Coast in the first such shipment in three years as global supply of feedstock for refineries has tightened in recent months due to the closure of the Strait of Hormuz.
The Solomon Sea tanker, laden with more than 540,000 barrels of low-sulfur and straight-run (LSSR) fuel oil, departed from Malaysia’s PRefChem refinery operated by state oil and gas giant Petronas last week, tanker data on MarineTraffic shows. The cargo is set to arrive in the United States in early September.
The tanker is heading to a refinery on the U.S. West Coast, a source with knowledge of the matter told Reuters.
The cargo is the first shipment from Malaysia’s 300,000-bpd PRefChem refinery in Pengerang to the United States since 2023, per shipping data monitored by Reuters.
U.S. refiners usually import fuel oil to use as feedstock from close exporting countries including Mexico and Venezuela, but the tight global fuel market and soaring refining margins have made the arbitrage wide enough for Malaysian supply.
The LSSR type of fuel oil is an uncracked residual petroleum product from low-sulfur crude oil. Due to the low sulfur content and minimal impurities, the uncracked LSSR fuel oil is a favored feedstock for refiners to produce gasoline or diesel, or blend into low-sulfur marine fuel.
Due to the tight fuel markets globally and peak seasonal demand, U.S. refiners have maximized capacity utilization rates this summer and are apparently in search of quality feedstocks from wherever available.
U.S. gasoline and diesel exports have run at record levels in recent weeks as the global fuel market is tightening amid depleting inventories, supply bottlenecks in the Middle East and Russia, and peak summer demand.
In the entire oil complex, refined products are facing the biggest squeeze, as diesel, gasoil, and jet fuel supplies tighten, pushing refining margins to record highs.
By Charles Kennedy for Oilprice.com
Hormuz Crisis Pushes Asian Refiners Toward U.S. Oil
North Asian refiners have increased buying activity to secure U.S. crude oil supply as an alternative to the Middle Eastern crude that may not make it outbound from the Strait of Hormuz as the U.S.-Iran stalemate continues and the chokepoint remains effectively closed.
At least four Asia-based refiners have bought U.S. crude volumes this week alone, traders told Reuters on Friday.
This week, tanker traffic – and shipping traffic as a whole – at the Strait of Hormuz has slumped further, according to observable transits with AIS positioning on.
Amid the Hormuz stalemate, Asian refiners are looking further afield for alternative supply as tight fuel markets and sky-high refining margins encourage refinery runs, if there is enough crude available.
In the deals this week, GS Caltex of South Korea bought 2 million barrels of Mars crude from Shell for delivery in November, at a premium of $13-14 above the Dubai benchmark for October, according to Reuters’ trade sources.
Cosmo Energy Holdings, one of the biggest refiners in Japan, also bought Mars, from commodity trader Trafigura. Japan’s biggest refiner by capacity, Eneos Corp, Japan's biggest refiner, purchased 2 million barrels of West Texas Intermediate (WTI) crude from Trafigura for November delivery, priced at a premium of over $10 per barrel above the October WTI price.
CPC Corp, the state-owned energy company of Taiwan, acquired 2 million barrels of WTI via a tender at a premium of around $8 to $9 per barrel to Dated Brent, according to Reuters’ sources.
Further south in Asia, some state-held Indian refiners are also seeking spot crude supply as term deliveries are constrained by the ongoing crisis in the Middle East and its key oil chokepoint, the Strait of Hormuz.
Mangalore Refinery and Petrochemicals Limited (MRPL) and Hindustan Petroleum Corporation Limited (HPCL) are looking to buy a combined 6 million barrels of crude oil via spot tenders, Reuters reported earlier this week, citing tender documents it has seen.
By Tsvetana Paraskova for Oilprice.com
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