Asian fuel oil imports from Russia are on course to reach an all-time high this month, shipping data from Kpler and LSEG has shown, as reported by Reuters. Total volumes are seen reaching over 3 million tons, or 614,500 barrels daily, according to the publication.
The record high imports from Russia come as a replacement for lost fuel oil supply from the Middle East amid the escalating war between the United States, Israel, and Iran. More than half of those 3 million tons are going to Southeast Asia, at between 1.7 million and 1.9 million tons, the data also showed, with China taking in the rest, or an estimated 1.2 million to 1.5 million tons.
“The disruption in fuel oil flows has an outsized impact on HSFO supplies relative to low-sulphur fuel oil supplies, as the blockade has also curtailed medium- and heavy-sour crude flows out of the Strait of Hormuz, tightening the overall crude supply complex,” Vortexa senior market analyst Xavier Tang commented, as quoted by Reuters.
The Middle East energy exports disruption prompted the U.S. federal government to issue sanction waivers for Russian crude and petroleum products in floating storage in a bid to ease prices a bit. Asian energy importers have clearly rushed to take advantage of that. However, if the Middle East paralysis of exports extends, Russian fuel oil will fall short of meeting Asian demand, one LSEG analyst said.
Shortages are on the cards for all fuels because of cuts in refinery run rates across the Middle East, following production shut-ins as producer countries run out of storage space. Theoretically, they could process that crude with nowhere to put it, but with the Strait of Hormuz effectively closed, those fuels would also need to be stored, hence the run rate reductions.
“The Strait of Hormuz remains blocked and crude availability remains a concern, meaning the market should remain bullish overall in the coming weeks or months,” Energy Aspects analyst Royston Huan said, as quoted by Reuters.
By Irina Slav for Oilprice.com
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