According to data from the Fujairah Oil Industry Zone on May 17, stockpiles of oil products at the Port of Fujairah in the UAE have increased for two consecutive weeks, reaching a five-month high as of May 15. The rise in stockpiles was primarily driven by a notable 35% surge in jet fuel, diesel, and other middle distillates, as reported by S&P Global.
Inventories in Fujairah, a major oil storage and shipping hub, have risen significantly. Total inventories increased by 7.5% in a week to reach 24.9 million barrels, the highest level since November 2021. Since the end of 2022, inventories have surged by 20%. However, exports of oil products from Fujairah slowed down, with only 2.29 million barrels shipped in the week starting May 8, the lowest since March 2022. Stockpiles of middle distillates, including diesel and jet fuel, reached 4.559 million barrels as of May 15, the highest level since September 2022. On the other hand, stocks of light distillates like gasoline and naphtha dropped by 14% to 6.884 million barrels, the lowest in two weeks. Heavy distillates used for power generation and as ship fuel expanded by 14% to 13.457 million barrels, the highest in five months. Comparing the performance in 2023, heavy distillates have increased by 33%, while light distillates have decreased by 7.8%, and middle distillates have surged by 48%.
LSFO demand capped, buoys stocks
The stock build in Fujairah’s low sulfur fuel oil (LSFO) segment can be attributed to lean bunker demand and increased imports. Traders in Fujairah noted ample inventories of high-sulfur fuel oil (HSFO) for downstream deliveries. The overall demand for International Maritime Organization (IMO)-compliant bunker fuel remained limited, leading sellers to lose inquiries to more aggressive competitors, despite already offering lower prices. Desperate selling activity was observed due to the low demand for LSFO. The premium of Platts Fujairah-delivered marine fuel 0.5% sulfur bunker over the FOB Singapore marine fuel 0.5% sulfur cargo value decreased from April to May. There is a substantial amount of oil available in the Fujairah region compared to the sluggish demand. Recent data shows significant LSFO cargoes being discharged at Fujairah port, indicating increased imports.
Bunker fuel market
Several factors are influencing the bunker fuel market in Fujairah, including weaker tanker rates, a decrease in the number of cargoes to be transported, and concerns about a potential recession. These macro factors are seen as downside risks to bunker demand in the near term, according to a trader based in Fujairah. The demand for high-sulfur fuel oil (HSFO) in Fujairah is relatively stronger compared to low-sulfur fuel oil (LSFO), and the market maintains some support for bunker premiums. Competitive bids for May’s supply of term ex-wharf 380 CST HSFO cargoes faced resistance due to healthy demand in the end-user market. However, despite ample inventories, significant increases in delivered premiums may be capped. Data from S&P Global shows that the Platts Fujairah-delivered 380 CST HSFO bunker premium over the FO 380 CST 3.5% FOB Arab Gulf cargo assessments rose to an average of $35.24/mt from April’s average of $28.81/mt.
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Source: S&P Global