- Fuel oil exports from Fujairah in the UAE slumped to an 18-month low in May.
- It is weighed down by plentiful supplies held in floating storage and contango in Singapore.
- Exports of fuel oil dropped to 78,600 b/d in May from 102,000 b/d in April.
- The drop resulted in all heavy distillates shipments to a record low of 87,300 b/d from 130,000 b/d in April.
- COVID-19 pandemic is expected to curb bunker fuel demand by 5% this year.
According to an article published in Platts and authored by Claudia Carpenter, fuel oil exports from Fujairah in the UAE slumped to an 18-month low in May.
Weighed down by excess supplies
It is weighed down by plentiful supplies held in floating storage and contango in Singapore, according to cargo-tracking data from Kpler.
Exports of fuel oil, used for bunkering and for power generation, dropped to 78,600 b/d in May from 102,000 b/d in April, Kpler data showed. The drop helped send all heavy distillates shipments from Fujairah to a record low of 87,300 b/d from 130,000 b/d in April.
Steep contango prices
“Steep contango in the Singapore fuel oil swaps market throughout May was the most significant driver of historically low fuel oil exports from Fujairah,“ Kevin Wright, Kpler’s lead analyst for the Asia Pacific based in Singapore, told S&P Global Platts.
“Also keeping Fujairah exports at bay was the high availability of fuel oil in floating storage off Malaysia and Singapore, as well as sharply higher freight rates in April and early May for dirty tanker movements between the Mideast Gulf and Asia.“
Curb in tanker demand
The shipping downturn caused by the coronavirus pandemic is expected to curb bunker fuel demand by 5% this year, with the cruise industry hurt the most, the International Energy Agency forecast on May 14. Fuel exports from Singapore, the world’s largest bunkering hub, declined to a record low of 114,000 b/d in May, from 146,000 b/d in March, Kpler data showed.
Pickup demand to increase
Fujairah may see a pickup in demand in the next few months as electricity demand soars for air-conditioning. Stockpiles of fuel oil and other heavy fuels used for marine bunkers and power generation in Fujairah were at an all-time high of 16.453 million barrels as of May 18, according to the Fujairah Oil Industry Zone.
“Fuel oil in Fujairah storage will see seasonal pull from Saudi Arabia, which will soon ramp up HSFO imports amid surging demand for the fuel for power generation during the summer heat,“ Wright said. “This increase in consumption may also help to strengthen the forward curve, consequently drawing down some of the 53 million barrels of fuel oil currently on floating storage around the world.“
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Source: Platts
