However, one area in which it is not been expanding is the Caribbean fuel oil supply market. The supply and logistics midstream company is pulling out of that lackluster business segment soon, and it is in the process of winding down its fuel oil and bunker supply operations in the Caribbean, fuel oil trading sources in the Caribbean told OPIS on Monday.

The company’s exit from the regional fuel oil market comes amid the ongoing tough market conditions, which have affected a few other players adversely as well.

Buckeye’s Caribbean fuel oil supply and marketing business began about two to three years ago. It supplies fuel oil and bunker fuel to resellers or marketers in back-to-back deals.

While the first year of business was encouraging profit-wise, the bottom line for the fuel oil segment in the subsequent years was adversely affected by the tough market conditions. A lack of arbitrage opportunities and weakening demand contributed to the challenging fuel oil market environment, which took its toll on a few other companies, including Noble Group, NuStar and OW Bunker.

Also, the U.S. saw the introduction of lower sulfur marine fuel in 2015. This opens an opportunity for some players to sell marine gasoil or blend ULSD with high-sulfur bunker to satisfy the new lower sulfur mandates.

Buckeye is now in the progress of squaring off its physical oil positions and meeting contractual supply obligations in the Caribbean, and its fuel oil business exposure has been slashed significantly so far this year. The complete pullout for the dirty product business is expected in the coming months.

The Caribbean fuel oil supply and distribution business falls under Buckeye’s Merchant Services segment, which centralizes all existing and new merchant activities to leverage common mid- and back-office support. This segment includes the legacy Energy Services segment, the Caribbean fuel oil supply and distribution business and new merchant activities supporting the terminals recently acquired from Hess.

Operating income from the Merchant Services segment appears to be turning the corner in the past two financial quarters, but that segment suffered an operating loss for the entire year in 2014.

The Merchant Services segment posted an operating income of $2.807 million in the fourth quarter of 2014, compared with an operating loss of $1.232 million a year ago.

For 2014, that segment posted an operating loss of $15.458 million, compared with an operating income of $3.085 million in 2013.

In the first quarter of 2015, the Merchant Services segment posted an operating income of $6.855 million, up from $2.029 million a year ago.

The tough fuel oil trading market has turned the market topsy-turvy in the past few years.

OPIS reported in August 2013 that NuStar eliminated price risk in its fuel oil and bunker trading business in an effort to turn around weak financial results for this market segment. NuStar leased out to Vitol storage tank space at NuStar’s St. Eustatius oil terminal in the Caribbean, and NuStar buys fuel oil supply from Vitol on a spot basis.

In this new trading maneuver, NuStar no longer holds fuel oil positions in the market and transitions to a less risky business strategy of selling fuel oil and bunker in back-to-back deals to power plants and shipping companies.

OW Bunker filed for bankruptcy last year due to a derivative fraud in Singapore, and Colonial Oil sold its Southeast marine fuel bunkering business to Chemoil.

In 2013, Noble Group cut back its global fuel oil and bunker fuel trading business amid a persistently challenging trading environment.

While it slowed down considerably in the dirty products business, Noble opted to focus more on markets with more potential upside, including crude oil, gasoline, distillates and biofuels.