The prospect of increased Venezuelan heavy crude and fuel oil flows to the U.S. Gulf Coast has upended the high-sulfur fuel oil (HSFO) market as far as Asia.
The premium of HSFO prices in Asia over the same fuel in the West has surged this week to the highest in eight months, since May 2025, as supply from Venezuela is set to increase in the U.S. and the Western hemisphere. At the same time, flows of sanctioned supply from Venezuela to China, its key buyer, are dwindling amid the U.S. blockade of shadow fleet vessels carrying crude and products in breach of the U.S. sanctions.
As a result, the premium of fuel oil in Asia over the price in the west has more than doubled since the year started. The key differential, the front-month East-West 380-cst HSFO swap, surged above $27 per barrel on Friday, according to LSEG data cited by Reuters.
The fuel oil prices in the U.S. are set to decline as the United States expects to receive between 30 and 50 million barrels of oil from Venezuela, according to U.S. President Donald Trump.
Increased supply of heavy crude at U.S. refineries would drive fuel oil prices lower in the West.
But in the East, Asian fuel oil prices see their premium surge amid changed oil flows.
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Venezuela’s state oil firm PDVSA has been unable to ship oil cargoes to Asia for a week, as the U.S. “oil quarantine” of Venezuela continues.
In fact, Chinese oil buyers have reduced their intake of Venezuelan oil as the discount between Brent and the country’s flagship Merey crude shrank from $15 per barrel last month to $13 per barrel now, Bloomberg reported on Tuesday, citing unnamed sources.
Chinese refiners will have to adapt to the new reality, analysts say.
“The loss of cheap Venezuelan feedstock will weigh on refiners’ profitability, forcing them to either scale back on refining run rates or source alternative residual feedstocks,” Emril Jamil, a senior oil analyst at LSEG, told Reuters.
By Tsvetana Paraskova for Oilprice.com
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