Total refined oil product stocks at the UAE port of Fujairah were 16.255 million barrels in the week to Monday, January 22, down 2.4% from the previous week, latest data from the Fujairah Energy Data Committee, or FEDCom, showed.
The relatively small change in total stocks masked larger movements in individual product categories, with light distillates up sharply, while heavy residues set a new record low, S&P Global Platts Analytics said in a report.
Stocks of light distillates jumped 21.1% on the week to an eight-month high of 7.2 million barrels. The petrol market is in the midst of seasonally low demand and heavy supply on high refinery runs rates in all regions. Demand in the Middle East in particular has cooled, with Saudi Arabia’s petrol demand lower, especially for premium grades, after the January 1 domestic price rise.
So far this month, the crack for Singapore RON 92 petrol against Brent crude has averaged $7.50/b — the lowest monthly average since August 2016. The front-month time spread for Arab Gulf petrol RON 95 remained in contango at minus 44 cents Tuesday, the report said.
Stocks of heavy distillates and residues fell 16.1% or 1.374 million barrels to 7.155 million barrels, the lowest total since FEDCom began reporting stock figures in January 2017. It was also the first instance where heavies did not represent the largest of the three product categories. Bunker demand in Fujairah has been dampened by the recent crude price rises, although buying interest has picked up in recent days as Brent futures have steadied at around $70/b. Nevertheless, overall weak demand in the Middle East is resulting in continued heavy volumes heading to Singapore despite narrowing price differentials between Singapore and Fujairah. Pakistan State Oil’s recent decision to suspend fuel oil imports could also be impacting appetite to hold stocks. The company typically tenders for around 500,000 mt, or 3.175 million barrels, each month of utility grade fuel oil loading from Fujairah.
The market structure for middle distillates is in backwardation, a dis-incentive to hold stocks, and as a result inventories fell 13.1% or 287,000 barrels to a four-week low of 1.896 million barrels. Both supply and demand fundamentals are buoyed by seasonally high refinery runs and heating demand in the Northern hemisphere. But gasoil demand in Europe is said to be normal for this time of year and set to decline as winter gives way to spring.
