- Heavy distillates inventories plunge 20%
- Drop in light distillates seen short lived
- OPEC+ cuts also contributing to shrinking stocks
- Inventories were at record 30.71 mil barrels in June
Oil products stockpiles at the UAE’s Port of Fujairah slumped to an 18-month low, with fuel oil recording the biggest plunge in more than two years on signs of recovering demand from the pandemic, reports Platts.
Oil stocks tumble
The total stood at 17.966 million barrels on March 8, down 14% from a week earlier and the lowest since Sept. 9, 2019, according to Fujairah Oil Industry Zone data compiled by S&P Global Platts. FOIZ provided updated data on March 10 exclusively to Platts.
Inventories are now 41% below the record 30.71 million barrels set on June 1, 2020 when COIVD-19 was crushing demand for everything from jet fuel to gasoline.
“Stock levels everywhere have drawn down as oil markets have shifted from contango at the height of the pandemic into backwardation on the back of demand recovery and OPEC+ supply cuts,” said Alex Yap, a senior analyst at S&P Global Platts Analytics in Singapore.
Backwarded market structure
A backwarded market structure implies higher current prices for an asset than the contracts maturing in later months in the futures market. Oil markets have been shifting from contango to backwardation since about the fourth quarter of 2020.
- Fuel oil and other heavy distillates stocks stood at 7.636 million barrels on March 8, down a whopping 20% from a week earlier and the lowest since Nov. 23, 2020. It was the biggest weekly drop since November 2018.
- Gasoline, naphtha and other light distillates stocks on March 8 stood at 6.62 million barrels, down 7.3% from a week earlier and the lowest since Nov. 30, 2020.
However, the dip in light distillate stocks is expected to be short lived, as more cargoes have been spotted for Asia to Middle East voyages.
The long range tanker BW Clyde, for example, is set to load gasoline mid-March from India heading to the Middle East while another LR tanker Margarita will be loading gasoline in mid-March for a China to Middle East voyage, according to Platts cFlow data.
“The [arbitrage] route is open and cargoes are being taken from Asia [to the Middle East],” one market source said. Diesel, jet fuel and other middle distillates inventories were 3.71 million barrels on March 8, 10% lower than a week earlier and the lowest since August 2020.
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Source: Platts
