Stockpiles of refined oil products at the UAE’s east coast port of Fujairah declined to a two-month low as of July 20, led by the biggest weekly plunge in seven months for fuels used for marine bunkers and power generation.
Inventories stood at 25.342 million barrels, down 5.7% on the week and the lowest since April 27, according to data released July 22 by the Fujairah Oil Industry Zone. Heavy distillates and residues, used in marine bunkers and for power generation, tumbled 14% to 14.09 million barrels, the biggest weekly drop since Dec. 2, 2019, and the lowest since April 27.
Global oil demand is on a “recovery path,” Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said on July 15 after the OPEC+ decision to ease record production cuts. Seasonal consumption by many OPEC countries in the Middle East, where power generation for air conditioning is peaking, will further tighten the market, he said.
Saudi Arabia itself is focusing on direct crude burning for fuel oil in the current environment of depressed refining margins, according to Kevin Wright, lead Asia Pacific analyst in Singapore at data intelligence firm, Kpler. Middle East suppliers have been focused on their own domestic consumption of fuel oil, along with small export volumes to Pakistan from the UAE, he said.
Marine bunkers, by contrast, are not showing much of a pick up in this region, according to Apurva Mali, founder of Masc Co. DMCC, a broker in bunker fuels in Dubai. Because marine bunkers are sold on credit, it will not be known until later in the year how demand has been affected by the economic slowdown due to the pandemic, he said.
Total stockpiles have dropped for four consecutive weeks, the longest decline since the five-week slump from May 27 to July 1, 2019. Inventories have now dropped 17% from the record 30.71 million barrels set on June 1, as the coronavirus pandemic crippled demand for all kinds of oil products.
Middle distillates, which include gasoil, diesel, marine bunker gasoil, jet fuel and kerosene, were among the hardest hit from the demand slump as stockpiles more than doubled in April and May. Now they are falling, with middle distillates inventories down 9% in the latest week to 3.941 million barrels.
Light distillates jumped 17%, the biggest increase since April 27, to 7.311 million barrels, a three-week high. Products in the category are gasoline, gasoline blending components such as reformate, and naphtha and other light petrochemical feedstocks.
S&P Global Platts is the official publisher of the data, which started being collected in January 2017.