Stockpiles of fuel oil used for marine bunkers and power generation at the Middle East oil hub of Fujairah in the UAE swelled to a record high as of June 8, marking the fifth advance in six weeks.
Inventories of the fuel oil that make up heavy distillates and residues have climbed 14% so far this month — matching the gain for all of May — as some shipowners held back purchases because of gains in crude oil prices, according to an S&P Global Platts report on June 10. Total oil products stockpiles, which include light distillates, middle distillates as well as heavy distillates and residues, dropped 0.7% over the week ended June 8 to 30.5 million barrels, according to data released June 10 by the Fujairah Oil Industry Zone. They fell from a record high a week ago, the fourth all-time high in five weeks.
The bunker fuel market in Fujairah had “good demand” in March and April even as the coronavirus pandemic took hold in the Middle East, but in May and so far in June the demand is down some 25%-30%, a Fujairah source told Platts.
“There’s been a lot of good news in the past one or two weeks in terms of the pandemic, but bunker demand in Fujairah doesn’t seem to be affected. It may take some time to affect real demand,” the source said.
Monthly fuel oil stockpiles actually declined 4.5% in March and 9.8% in April. “There’s clearly been a heavy lag in how the pandemic is affecting shipping, and in turn bunker volumes,” Apurva Mali, sales manager at Masc Co. DMCC, a bunker fuels broker in Dubai said.
“Vessels can take weeks to reach their destination, so many of these contracts couldn’t be cancelled right away. Now you see vessels being idled, and contracts cancelled. While oil tankers are doing well because of an excess of supply, everything else is down.”
The shipping downturn caused by the coronavirus pandemic is expected to curb bunker fuel demand by 5% this year, the International Energy Agency forecast on May 14. Fuel oil exports from Fujairah declined to an 18-month low in May, weighed down by plentiful supplies held in floating storage and the contango market structure in Singapore, according to cargo-tracking data from Kpler.
Fujairah may see a pick up in demand in the next few months as electricity demand soars for air-conditioning.
“Fuel oil in Fujairah storage will see seasonal pull from Saudi Arabia, which will soon ramp up HSFO imports amid surging demand for the fuel for power generation during the summer heat,” Kevin Wright, Kpler’s lead analyst for Asia Pacific based in Singapore, told Platts previously.
Inventories of middle distillates, such as jet fuel, kerosene, marine bunker gasoil and diesel, dropped 16% — the first decline in 11 weeks — to 5.014 million barrels. Jet fuel demand in the region has been recovering, particularly in India, where domestic flights continued for the 15th day as of June 8.
On June 3, the UAE announced plans to allow the transfer and transit of passengers from other international destinations to some of its airports amid continued relaxation of coronavirus-related travel restrictions.
Stockpiles of light distillates, such as gasoline, naphtha and other light petrochemical feedstocks, stood at 8.318 million barrels, down 3% from an 11-month high a week earlier.
Platts is the official publisher of the Fujairah oil products data which started in January 2017.