U.S. Refiners Seek Alternatives To Russian Oil Amid Tensions

Some gasoline manufacturers in the United States that have depended on Russian imported oil are searching for alternate suppliers as the situation on the Russian-Ukrainian border escalates.

According to individuals close to the situation who requested not to be identified because they were not allowed to speak openly, at minimum two large Gulf Coast refiners are looking to diversify their buys of fuel oil that may be used as a source to manufacture gasoline and diesel. According to the insider, one trader is hunting for naphtha, a component of oil used in gasoline blending, from countries other than Russia.

The steps highlight the degree to which the oil sector is concerned about the crisis on the Ukrainian border, after the Biden administration's warning that Russia may intervene. The Kremlin has frequently and categorically rejected any intention to strike. While the United States is the globe's greatest oil producer and exporter, it is still reliant on crude oil imports, with Russia being a major supply. Biden has stated that the United States is prepared to react to a Russian assault with devastating sanctions.

"Any limits on Russian supplies would just hurt the purchaser since the Russians can simply put their fuel oil in China or India," remarked David Wech, chief economist at oil data-supplier Vortexa Ltd. "That would put the United States in a tricky situation because of the effect on fuel prices," he explained.

The concerns over Russian oil supply come at a time when normal gasoline prices in the United States are at their peak in almost eight years, increasing the pressure on President Joe Biden to ease consumer agony at the pump.

According to the sources, two Texas refineries are in contact with providers in Mexico and Brazil to inquire about supply and pricing in the long term. As monitoring data provided by Bloomberg shows, Brazil, which generally exports fuel oil to Singapore and Europe, sold one shipment to the United States Gulf Coast this month and has another tanker expected in March.

Russian straight-run fuel oil, recognized as Mazut 100, has become a favorite among oil companies since it is less expensive than crude oil, which is selling at its record prices since 2014. The M100 may be used as a crude alternative in the fractionating column, topping up crude oil from the Permian Basin, or as a raw material to refinery units or “cokers”, which produce gasoline.

Russian fuel oil is more attractive than Mexican fuel oil, for instance, due to its adaptability. Because of its volatility, Mexican fuel oil may only be used in cokers and not in distillation plants. Among the main consumers of Russian fuel oil are Valero Energy Corp., Exxon Mobil Corp., and Chevron Corp.

According to other persons connected with the issue, fuel producers in New York Harbor, America's main gasoline marketplace, have started looking for alternatives to the naphtha they regularly transfer from north Russia before the summer driving period. The United States normally buys two or three shipments of Russian light naphtha for gasoline mixing each year and is seeking alternate supply from Europe and Latin America.