Dubai — Refined oil product stockpiles at Fujairah snapped the longest decline in a year, with rises in heavy and middle distillates in the latest week more than making up for a drop in gasoline and other light distillates.
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Inventories were 25.714 million barrels as of July 27, up 1.5% from a week earlier, according to data released July 29 by the Fujairah Oil Industry Zone. Stockpiles had tumbled 16% over the previous four weeks, the longest slide since the five-week drawdown from May 27 to July 1, 2019, data compiled by S&P Global Platts showed.
Stockpiles dropped 9.8% for July, the second consecutive monthly fall after builds in April and May as the coronavirus pandemic hit demand, especially for jet fuel and gasoline. Now Pakistan, which is known to import fuel from the UAE, has been tendering for gasoline to be delivered in August and September. Light distillates slumped 15% in July.
"Gasoline should continue to do better than most expect," Omar Najia, global head of derivatives at BB Energy in Dubai, said. "Air conditioning use will be robust as always and will conform to the same seasonal pattern we see every year. The only question then becomes how quickly does demand recover, and unless you are talking jet fuel, it recovers quickly and will continue to surprise to the upside."
Heavy distillates and residues stockpiles are falling as well -- down 11% in July, the first monthly drop since April -- as Middle East demand for fuel oil to power air conditioning in the summer heat eroded supplies. Heavy distillates, which include marine bunkers and fuel used for power generation, rose 4% in the latest week to 14.599 million barrels.
Light distillates, which also include naphtha and other light petrochemical feedstocks, fell 7% in the latest week to 6.765 million barrels. There have been few export cargoes of naphtha from India in recent months, and Bharat Petroleum Corp. Ltd. confirmed it had cancelled a tender offering 35,000 mt of naphtha. Indian refiners have increased run rates as incremental cargoes are channeled to domestic petrochemical producers.
Middle distillates rose 11% for the latest week and 7% for July to 4.39 million barrels. The category includes gasoil, diesel, marine bunker gasoil, jet fuel and kerosene. Stockpiles more than doubled in April and May as air travel was severely restricted.
"Demand is certainly returning but not as quickly as many people forecast," director of Starfuels commodities brokerage, Matt Stanley, said. "Heightened sentiment is offering support to the front of the curve and this is allowing stocks to be drawn. Whether this continues over the coming weeks we will wait and see."
(Updates with trader comment.)