Fuel oil exports bound for the U.S. Gulf Coast slumped to their lowest level since January 2019 last month, a sign of weakened refinery demand as margins have softened, analysts said.
Feedstocks like high sulfur fuel oil and other heavy residues can be refined into higher value products such as gasoline and diesel using secondary units.
But loadings of those products to the Gulf Coast, America’s largest refining hub, fell by a third in August from the prior month to 260,000 barrels per day (bpd), according to data from ship tracker Kpler, marking a more than five-year low.
Cargoes departing Mexico for the Gulf Coast fell 25% month-over-month, hitting 77,000 bpd and their lowest level since July 2021, driving much of the decline, Kpler data showed.
“On the demand side, refinery margins aren’t strong enough to incentivize U.S. Gulf Coast refiners to run their secondary units harder to process this fuel oil,” said Rohit Rathhod, a market analyst at energy researcher Vortexa.
U.S. gasoline cracking margins – the spread between gasoline futures and West Texas Intermediate crude futures – typically narrows as the summer driving season draws to a close. Even so, that spread is currently at around $12 a barrel, roughly $10 a barrel below last year’s…