Fujairah's commercial stocks of refined oil products totaled 16.512 million barrels in the week to Monday, October 2 down 14.4% week on week, the lowest level since stock records for the UAE port began being published in January.
Light distillate stocks, mainly petrol and naphtha, fell to a fresh eight-month low at 4.752 million barrels, down 5% week on week from 5.002 million barrels, data released Wednesday by the Fujairah Energy Data Committee (FEDCom) showed. Middle East demand has been firm, supported by recent tenders for October petrol from Egypt and Kuwait.
Middle distillates also fell by 5.6% to 2.475 million barrels, the second lowest level on record, and 1.225 million barrels below the average for the year so far. This is again due largely to the ongoing impact of Hurricane Harvey on US Gulf Coast refineries.
The latest data from the US Energy Information Administration showed distillate production at 4.64 million b/d, still some 400,000 b/d below pre-Harvey levels. The arbitrage opportunity to move gasoil from the Middle East to Europe remains open, but stronger freight rates have begun to erode these economics. The east-west Gasoil EFS was minus $25.93/mt Tuesday.
BACKWARDATION ENCOURAGING HEAVY DISTILLATES DRAW
Fujairah's stocks of heavy distillates and residues, which constitute more than half the total oil products inventory at the port, logged the largest fall, dropping 20.5% to 9.285 million barrels, the lowest total since May 22. This was attributed to increased outflows of fuel oil during the week, including sizable volumes headed to Rotterdam and Port Qasim in Pakistan.
Pakistan State Oil tendered for a total of 520,000 mt of HSFO for October loading from Fujairah, up from 325,000 mt in August, to meet power sector demand. Consumption is expected to start gradually declining later this month, following the startup this month of the country's second LNG import terminal. First/second month Arab Gulf 180 CST HSFO swaps saw an average backwardation of $2.13/mt in September compared to 56 cents/mt in August and 62 cents/mt in July. This stronger market backwardation may also encourage traders to lower their stocks.
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