Crude Turnarounds & Weather To Drive US Fuel Oil

Credit: Zbynek Burival/Unsplash

Wholesale fuel oil markets across the US face uncertain price pressure heading into 2023, as seasonal heating demand in the northeast and Gulf coast crude unit turnarounds have the potential to siphon supplies in currently saturated regional markets, reports Argus Media.

Bolstering blending component costs

As major crude distillation units (CDUs) head into turnaround, supplies of both high-sulphur fuel oil (HSFO) and low-sulphur blending components — such as slurry oil, atmospheric tower bottoms and vacuum-gasoil (VGO) — may tighten, allowing prices to rise after bottoming out this winter. This will bolster blending component costs in the event of short supply and allow 0.5pc low-sulphur fuel oil (LSFO) differentials to rise versus the crude basis.

Planned CDU maintenance is expected to begin at a 584,000 b/d Baytown, Texas, refinery, in the first quarter of 2023 as well as potential crude turnarounds at a 160,000 b/d Houston, Texas, refinery and a 325,000 b/d Port Arthur, Texas, refinery.

If Gulf coast coking units experience maintenance, HSFO may lose a potential outlet for feedstock demand, and prices could fall further, after hitting $51/bl on 6 December, the lowest since February 2021, as supplies rise without a home.

Similar to the US Gulf coast, a cold northeast winter could instigate a drop in fuel oil supply and return 0.3pc sulphur fuel oil prices to unprecedented highs, should the distillate, natural gas and coal sectors experience unexpected price surges.

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Source: Argus Media