Oil product stockpiles at Fujairah on the UAE’s east coast have surpassed 30 million barrels for the first time, with inventories of both middle distillates such as jet fuel and heavy distillates such as marine fuel hitting all-time highs, data released Wednesday by the Fujairah Oil Industry Zone showed.
Total stockpiles rose 8.6% week on week to 30.262 million barrels Monday, the third consecutive weekly record high, the data showed. Inventories of light distillates including gasoline jumped 10% on the week to 8.236 million barrels, the highest since August 19, 2019, while middle distillates rose 2% to 5.573 million barrels and heavy distillates/residues rose 10% to 16.453 million barrels.
Fujairah has capacity to store about 40 million barrels of products, although some terminals cannot be full because they need extra room for blending. Many terminals are also already leased out, leaving even less room for new supplies.
Stockpile gains have picked up pace in May as severe restrictions on movement to contain the coronavirus pandemic remain in place across much of the Middle East and India. However some economies have started to re-open gradually, with the UAE dropping a requirement to get a permit before leaving home.
“Demand hasn’t really got going yet despite the easing of restrictions,” said Matt Stanley, director of Starfuels commodities brokerage. “Bunker demand could weaken further and follow Singapore, which in the last few days has slipped to discounted differentials,” he added.
Heavy distillates/residues include marine fuel and fuel used for power generation. The category last recorded an all-time high stocks of 15.445 million barrels on April 6.
“For Fujairah and other nearby ports, we have seen a significant drop in demand the last few days,” said Apurva Mali, sales manager at Masc Co DMCC, a Dubai-based broker in bunker fuels.
A contango market structure is still enticing traders to seek storage options with the intention of reselling cargoes at a higher price later, analysts said.
Fujairah has 16.095 million barrels of crude and oil products in floating storage as of May 20, with at least two vessels holding gasoline, according to cargo tracking data from Kpler.
“Demand has been down, the markets have been in contango and the Middle East finished most scheduled refinery maintenance in the first quarter,” said Alex Yap, senior analyst at S&P Global Platts Analytics in Singapore. “A combination of all three has contributed to the jump in stockpiles.”