Oil product stockpiles at the UAE's Port of Fujairah have fallen to their lowest level on record, with strong demand for middle distillates and heavy residues inducing significant draws from storage, according to data from the Fujairah Oil Industry Zone provided exclusively to S&P Global Platts.
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Total inventories shrank 1.286 million barrels, or 7.9%, week on week to 14.998 million barrels as of Sept. 20, the smallest volume since stock reporting at the port began at the start of 2017.
The previous low of 15.090 million barrels was recorded on Nov. 13, 2017.
Heavy residue inventories fell 6.6% to 6.980 million barrels, the data showed, driven by a fuel oil market East of Suez that has seen fewer flows from the West, while soaring natural gas prices have prompted power plants to switch feedstock to fuel oil, according to traders.
"[The price of] LNG is now higher than alternatives," Mike Muller, Vitol's head of Asia, said Sept. 22 on a Gulf Intelligence webinar. "Every consultant has been getting out their notepads to see where the switching can occur-- LNG to coal or liquids. LNG prices have underpinned fuel oil in a very big way."
The bunker market in Fujairah saw an uptick of activity, traders said, with offers for delivered marine fuel maximum 0.5% sulfur heard between $548/mt and $560/mt and the fuel assessed at $548/mt on Sept. 22, a $5/mt discount to Singapore-delivered bunkers.
Middle distillate stocks, including diesel and jet fuel, fell 21.8% to 3.061 million barrels, the data showed.
Industry sources cited increased arbitrage flows out of the East and Arab Gulf to the West and said regional supplies are likely to remain tight, with lower exports expected from China, Japan and Taiwan in October.
Light distillate stocks, including gasoline and naphtha, rose 1.2% on the week to 4.957 million barrels, according to the data, with gasoline demand muted due to the ongoing spread of the coronavirus delta variant in Asia. Mobility restrictions have been implemented in many countries to control the infections.
Year on year, total oil product stocks in Fujairah were down 29.99%, with heavy residues 30.60% lower, middle distillates 34.96% lower and light distillates 25.55% lower.
Fujairah stocks tumble to lowest on record
Unit: million b/d
Source: FEDCom/S&P Global Platts