Total refined product stocks at the UAE port of Fujairah stood at 15.864 million barrels in the week to November 22, up 5.1% from the previous week, despite a major drop in middle distillates, according to data from the Fujairah Energy Data Committee (FEDCom).
Stocks of middle distillates plunged by almost 28% to just 1.531 million barrels, a new record low, and less than half the 3.47 million barrel average for the year so far, according to a report by Platts Analytics.
The latest inventory fall comes as the arbitrage opportunity to move gasoil to Europe is firmly closed, with the East-West Gasoil EFS at a near three-month low of minus $10.32/mt on Tuesday. While the gasoil market has been the weakest performing part of the barrel in recent weeks, both Singapore and Persian Gulf time spreads have strengthened as regional demand improves.
The front-month time spread for Arab Gulf Gasoil has been in a contango since the beginning of November, up from a recent low of minus $1.47/b two weeks ago. On the supply front, sources noted a steady stream of outflows from India and the Middle East in recent weeks. Kuwait Petroleum Corp. is closing a sell tender for 500 ppm sulfur gasoil loading over December 8-9.
FUEL OIL STOCKS STILL LOW
At the same time, stocks of heavy distillates and residues rose by 16% to 9.641 million barrels, a new eight-week high. However, the figure is still below the 10.3 million barrel average since the start of the year.
Fuel oil inventories have been low since the beginning of October amidst a backwardated market structure and sluggish bunker demand. On average, some 2 million mt has left the region each month for Asia, and this is expected to continue into December, Platts Analytics said, as the price incentive for fuel oil supplies to the east remains in place. Front-month Singapore 380 CST swaps have seen a premium of around $7-8/mt relative to Arab Gulf 180 CST for the past month.
Light distillate stocks showed the least variation this week, only edging up 0.9% to 4.692 million barrels. European gasoline has been heading to West Africa and the US, which could signal a more limited supply to meet healthy Middle Eastern demand. Asian supply was seen trending upwards on increased Chinese export volumes expected in November and into December. However, this is likely to be matched by strong demand in Indonesia, Sri Lanka and Vietnam. As a result, the outlook for petrol East of Suez looks unchanged, Platts Analytics said.
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