According to Platts data, oil product inventories in the United Arab Emirates’ (UAE) Fujairah bunkering and oil hub in the Middle East jumped to record highs in the week to May 18, reports Reuters.
Fujairah oil product inventories
- Fujairah’s overall oil product inventories soared to 30.262 million barrels in the week to May 18, above the previous record of 27.859 million barrels in the week before.
- Inventories for middle distillates and those for residual fuels also rose to records in the week to Monday at 5.573 million barrels and 16.453 million barrels, respectively.
- Fujairah’s light distillate inventories stood at a nine-month high of 8.236 million barrels, the data showed.
Tony Quinn, chief executive of storage consultants Tankbank International said that all the tank farms were still full.
What is the reason?
Fewer cargoes loaded for distribution
According to Quinn, Fujairah’s inventories rose amid lower tank throughput rates which dropped by 30% since January, due to weak fuel demand as fewer oil cargoes were loaded onto ships for distribution.
A collapse in fuel demand due to widespread lockdowns to limit the spread of the coronavirus has caused fuel inventories in global storage hubs balloon.
Contango market structure
Additionally, oil traders are taking advantage of the contango market structure for fuels, which incentivises storing supplies for later sales since future deliveries are worth more than those for immediate delivery.
Inventories begin to ease gradually
The front-month contango structure for benchmark Asian gasoil GO10SGSPDMc1, jet fuel JETSGSPDMc1 and low-sulphur fuel oil LFO05FSGSMc1 widened to records in March and April, an improved demand outlook and a narrowing contango currently may see inventories gradually begin to ease.
A UAE-based oil trader said “Hopefully now that contango is thin, (suppliers) will start releasing stocks soon.”
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!