Asia's imports of Russian fuel oil are expected to hit record highs

According to shipping data from Kpler and LSEG, Asia’s fuel oil imports from Russia are expected to hit a record high this month. The total import volume is projected to exceed 3 million tons, or about 614,500 barrels per day.

Amid ongoing conflicts in the United States, Israel, and Iran, the record-high imports from Russia serve as a substitute for lost Middle Eastern fuel oil supplies. Data also shows that over half of this volume (approximately 1.7 to 1.9 million tons) is shipped to Southeast Asia, with the remaining 1.2 to 1.5 million tons imported by China.

Xavier Tang, senior market analyst at Vortexa, commented, “The blockade has also restricted the flow of medium and heavy sour crude through the Strait of Hormuz, tightening the entire crude oil supply system. As a result, disruptions in fuel oil flows have a greater impact on high-sulfur fuel oil supplies than on low-sulfur ones.”

Disruptions in Middle Eastern energy exports have prompted the U.S. federal government to grant sanctions exemptions for floating storage of Russian crude oil and petroleum products, aiming to slightly ease prices. Asian energy importers have evidently been quick to take advantage of this. However, an analyst at LSEG stated that if Middle Eastern exports remain paralyzed, Russian fuel oil will be insufficient to meet Asian demand.

Due to depletion of storage capacity in producing countries leading to shutdowns, refinery utilization rates in the Middle East have declined, potentially causing shortages of all fuels. In theory, they could process these stranded crude oils, but since the Strait of Hormuz is effectively closed, these fuels also need storage, which necessitates reducing operating rates.

Royston Huan, analyst at Energy Aspects, said, “The Strait of Hormuz remains blocked, and crude oil supply continues to be an issue, meaning the market should generally remain bullish over the coming weeks or months.”