LSFO Ship Demand Weakened, Oil Product Stocks Touched A 4-Week High

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  • Fujairah bunker prices down 37% since July 5
  • Total inventories up 27% on year
  • Only middle distillates stock down on year

According to Fujairah Oil Industry Zone statistics, oil product stockpiles at the UAE’s Port of Fujairah reached a four-week high on September 12 driven by increases in fuels used for power generation and shipping amid signs of slowing shipping demand for low sulphur grades.

Increased stockpiles 

As of September 12, total inventories were 23.450 million barrels, the highest level since August 16 and an increase of 7.9% from the previous week, according to FOIZ data made exclusively available to S&P Global Commodities Insights. Gains were seen for the week in each of the three product categories for light, middle, and heavy distillates.

Light distillate stocks, which include gasoline and naphtha, increased 4.1% over the course of the week to reach 7.361 million barrels, a three-week high. Middle distillate stocks, which include kerosene and jet fuel, were up 0.8% to 2.693 million barrels, a two-week high.

Stockpiles had increased by 27% since last year, driven primarily by a 53.57% increase in heavy distillates. Over the same time period, light distillate stockpiles have increased by 27.9%, while intermediate distillate stockpiles have decreased by 32.4%.

Subdued demand

Stocks of heavy distillates and residues used as fuel for power generation and marine bunkers jumped 12% in the week to 13.396 million barrels, the highest since June 7, 2021.

Marine fuel with 0.5% sulfur delivered to Fujairah has dropped 37% since July 5 to $717/mt as of Sept. 13, after falling to $660/mt on Sept. 8, the lowest since Jan. 25, data from S&P Global data showed.

Subdued demand for low sulfur fuel oil bunkers has primarily contributed to the rising stockpiles, according to local traders.

“Inquiries-wise, the market is on the quieter side [during the week started Sept. 12] even more so compared to the previous week,” a Fujairah-based trader said on Sept. 14.

Amid the elevated LSFO inventories, Fujairah’s ex-wharf marine fuel 0.5%S cargoes for term contract supply in September were concluded at premiums of around $23-$37/mt to benchmark FOB Singapore marine fuel 0.5%S cargo values, softening from the $40-$60/mt concluded earlier for August parcels, traders said.

Sinking assessments 

“Offered levels [for LSFO bunkers] are everywhere with very few inquiries seen. Few stems could be fixed,” a Fujairah-based bunker supplier said. Most barges cannot refuel fast enough owing to congestion at terminals, a market source said.

According to S&P Global statistics, the lacklustre demand has caused Platts Fujairah-delivered marine fuel 0.5%S bunker premiums over the FOB Singapore marine fuel 0.5%S cargo assessments to shrink, averaging $40.85/mt from $41.02/mt the previous week.

On the other hand, merchants reported that HSFO demand has been higher than typical.

Changed destination country

“Barging slots are tight up till Sept. 25, buyers are struggling to get offers,” a trader said. “Berths are occupied due to congestions… There are also limited barge capacity and few players for HSFO.”

Kpler records show that the amount of fuel oil exported from Fujairah in the week beginning September 5 was only marginally less than the 4.1 million barrels exported the previous week. According to the statistics, Saudi Arabia has not been a destination country for Fujairah fuel oils since the week began on August 22. Previously, Saudi Arabia sourced fuel oils from Fujairah for power generation due to the hot weather-driven need for air conditioning.

 

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Source: S&P Global

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