Total refined oil product stocks at the UAE port of Fujairah stood at 17.412 million barrels in the week to January 8, up 13.5% from the previous week, and setting a three-month high, as all three distillate categories rose, according to latest data from the Fujairah Energy Data Committee, or FEDCom.
The biggest rise came from middle distillates, which jumped by 56% or 744,000 barrels, to an eight-week high of 2.07 million barrels. The middle distillate markets are currently stronger compared to petrol and fuel oil, supported by cold weather in the US and parts of Europe, S&P Global Platts Analytics said in a report.
Indian gasoil cargoes have reportedly been diverted to the US East Coast, which would indicate tight supply in the Atlantic basin, the report said. Supply in the Middle East is also expected to tighten, following the announcement that Saudi Aramco will shut a 200,000 b/d crude distillation unit at the Satorp refinery from January 8 for 46 days of planned maintenance. Satorp has a nameplate capacity of 400,000 b/d and is one of the region’s major gasoil exporters.
The Middle East continues to send volumes of jet fuel to Europe. According to data from cFlow, S&P Global Platts trade flow software, jet fuel cargo arrivals into Northwest Europe from East of Suez ports averaged around 1.2 million mt/ month in 2017.
Stocks of light distillates also rose by 16.2% to a 20-week high of 6.268 million barrels. The front-month timespread for Arab Gulf 95 RON gasoline was at a contango of minus 38 cents Tuesday, which is consistent with a seasonally weaker petrol market currently seen globally. The shift into a contango structure supports higher stocks levels, but underlying demand in the Middle East is still seen as healthy, S&P Global Platts Analytics said.
Stocks of heavy distillates and residues rose by 5.2% or 448,000 barrels to 9.074 million barrels, supported by a weakening front-month timespread for Arab Gulf 180 CST, which pushed further into a contango over the past week. Bunker demand in Fujairah was reported as lackluster in recent days amid a continued rise in crude prices. Pakistan State Oil has also reportedly cancelled its fuel oil import tenders for February, and will not issue further tenders until June at the earliest, instead relying on domestic fuel oil supply.
The decline comes after the startup of a new LNG import terminal last year at Port Qasim, which has led the government to restrict fuel oil use in the power sector due to environmental and political considerations. PSO typically tenders for up to 500,000 mt of fuel oil loading from Fujairah every month, and its withdrawal from the market could negatively impact the market for utility grade fuel oil.