Russia kept fuel oil exports to the United States close to its record-highs in the first six months of this year, as Washington looks to replace the heavy Venezuelan barrels it stopped buying a year ago, traders said and data showed, Reuters reported.
The U.S. imposed sanctions on Venezuelan oil last year in an effort to squeeze out President Nicolas Maduro. While facing a drastic fall in revenues, Caracas re-directed some flows and Maduro kept his position.
As many U.S. refineries historically process heavy crudes, the United States has increased purchases of fuel oil, including from Russia. Supplies by Moscow doubled to 11 million tonnes last year from 2018, according to Refinitiv Eikon data.
In the first six months of this year, shipments of fuel oil from Russia stood at 5.3 million tonnes, on track to match record-high volumes of 2019, the data showed.
The United States produces mostly light oil, which is less suitable for complex refineries designed to run heavy oils from Latin America. The U.S. has lowered shale oil production amid weak demand.
Unlike Russia, Washington is not a member of global and coordinated oil production cuts which are in place through April 2022.
“Loss in heavy oil production by OPEC and loss of Venezuelan barrels is worse than of shale oil,” a Russian fuel oil trader said.
Fuel oil is cheaper than Russia’s flagship Urals blend, which is also shipped to the United States and has recently spiked in price due to the global cuts, traders said.
“The demand (for Russian fuel oil) will be there as (for U.S. refiners) margins are better than for oil with higher sulphur content, better than for Urals,” a trader said.
According to Refinitiv Eikon data, fuel oil from Russia comes mainly to the U.S. Gulf of Mexico area – Houston and Galveston in the state of Texas which dominates U.S. refining sector with nearly 50 plants and to Pascagoula in Mississippi.
Russian fuel oil shipments to the United States come mainly from the Baltic Sea port of Ust-Luga, according to Refinitiv Eikon data, with 3.3 million tonnes exported between January and June.