Analysis:
Last month, fuel oil exports to the U.S. Gulf Coast dropped to their lowest level since January 2019 due to weakened refinery demand and softened margins. This decline was mainly driven by reduced loadings of high sulfur fuel oil and heavy residues, which can be refined into higher value products like gasoline and diesel. Refinery margins are not strong enough to incentivize U.S. Gulf Coast refiners to process fuel oil, leading to a decrease in secondary unit utilization. The attacks on vessels crossing the Red Sea also contributed to lower fuel oil deliveries to the Gulf Coast, as shippers diverted around the horn of Africa to avoid the conflict in the Red Sea. Overall, these factors have had a significant impact on fuel oil imports into the U.S. and refinery operations in the Gulf and East Coast regions.