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
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