- Heavy distillates inventories are seen rising even more
- Backwardation discouraging gas oil storage
- Total inventories down 17.6% since April 2021
Stockpiles of oil products in the UAE’s Port of Fujairah have risen to a two-week high, despite diesel and other middle distillates falling to near-record lows as reported by S&P Global.
Backwardation in the gas oil market
According to statistics from the Fujairah Oil Industry Zone released exclusively to S&P Global Commodity Insights on April 13, total inventory was 17.113 million barrels as of April 11, up 7.2% from a week earlier and the most since March 28.
Middle distillates, which include diesel and gas oil, fell 36.9% to 1.18 million barrels during the period, close to the record low of 1.103 million barrels established on March 7.
Traders noted that backwardation in the gas oil market was discouraging storage.
Stockpiles
Total stockpiles of gasoline, naphtha and other light distillates increased by 44.6% in the week ending April 11 to 4.932 million barrels, the highest level in two weeks. According to market sources, stockpiles could rise much more because China is likely to increase gasoline shipments in April.
Over the same period, heavy distillates used as power generation and marine bunker fuel increased 2.9% to 11.001 million barrels, the highest level since Jan. 31.
According to dealers, the increase in Fujairah heavy distillates was mostly due to a rise in high sulphur fuel oil. According to local bunker suppliers, plentiful HSFO supplies have encouraged merchants to offer parcels with a rather quick turnaround, with some arriving in as little as 2-3 days.
Premiums for Fujairah-delivered 380 CST HSFO cargo assessments versus FOB Arab Gulf 180 CST HSFO cargo assessments averaged $21.51/mt on April 11-12, down from $24.02/mt the week before.
Self-sanctioning procedures
Self-sanctioning procedures have continued to keep global bunker demand under check, according to market sources, despite the ongoing Russia-Ukraine crisis.
Low sulphur fuel oil availability increased in April, according to bunker providers, as some suppliers in Fujairah who avoided Russian feedstocks for LSFO discovered alternatives in Europe, with intentions to also source from Singapore. They believe this will lead to significantly larger heavy distillate inventories.
On April 11-12, the premium of Fujairah-delivered marine fuel 0.5% S cargo assessments over the benchmark FOB Singapore marine fuel 0.5% S cargo assessments averaged $44.22/mt, down from $46.72 for the week ending April 8, according to S&P Global data.
Despite the increasing stocks over the last three weeks, heavy distillates were 1.9% lower on April 11 than a year ago, joining light and middle distillates in being lower. As of April 4, heavy distillates had increased by 29.8% over the previous year.
As of April 11, overall inventory was 17.6% lower than a year before, with light distillates down 20.59% and middle distillates down 64.75%.
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Source: S&P Global
