Local traders claim that demand at the UAE’s main bunker hub of Fujairah is declining due to increased competition from suppliers of high-sulphur fuel oil in the nearby Sharjah port of Khor Fakkan, as reported by S&P Global.
Elevated inventories and suppliers
The steady inflow of Russian-origin HSFO barrels in the Fujairah region has created an uneven playing field for suppliers and elevated inventories. This has caused a fall in HSFO premiums due to overcapacity, resulting in a decline in bunker sales. With competitors at Khor Fakkan more focused on HSFO than on low-sulfur fuel oil refuelling operations, shifts in HSFO demand are relatively more pronounced compared to other grades. Some suppliers are highly competitive and have been able to sell delivered HSFO bunkers at flat to a maximum of $5/mt premiums. The Platts Fujairah-delivered 380 CST high sulfur fuel oil bunker premium over the FO 380 CST 3.5% FOB Arab Gulf cargo assessments has softened to an average of $28.06/mt since the beginning of Q2 2023, from $42.54/mt across the whole of Q1 2023.
Spot sellers
Long-term sellers in Fujairah were less impacted than spot sellers as the number of bunker barges increased up to 50% in Khor Fakkan and Fujairah, where suppliers are expanding their fleets to capture a larger market share. However, the availability of bunker barges for supply is likely to fluctuate significantly on a monthly basis.
Cargo inflows buoy stockpiles
The availability of sanctioned Russian-origin HSFO barrels has created an uneven playing field for suppliers at the Fujairah belt, causing a decline in HSFO bunker sales in March. While the market share of some long-term delivered contracts remains stable, spot sellers have been impacted, with some suppliers selling at flat to $5/mt premiums. However, HSFO inventories are expected to remain adequate amid busy stocking activity ahead of peak summer demand for the Middle Eastern utility sector, and some cargoes sold by terminals were traded at higher premiums than their offers on a delivered basis.
Traders have raised concerns about the compliance and origins of Russian and Iranian HSFO barrels being sold in Fujairah, despite their excellent specifications. The inflow of Russian HSFO barrels has led to increased inventories and a drop in HSFO premiums due to overcapacity and competition. While the availability of sanctioned barrels will likely keep HSFO inventories adequate for the downstream market, some shipping companies avoid using these bunker fuel alternatives to steer clear of potential compliance risks. Iranian HSFO barrels have also been discharged around Fujairah in significant amounts in April.
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Source: S&P Global
