A new year often brings with it fresh optimism and 2021 has been no exception. One indication of this has been the steady rise in the price of crude oil, which has led to international benchmarks breaching $60/barrel in recent weeks. Despite this the global pandemic continues and we have seen countries seek to protect their populations through vaccination programs. In the United Arab Emirates there has been a swift rollout of vaccinations, with half the population having already received theirs.
As vaccinations accelerate oil demand is expected to continue rising as the global economy recovers from last year’s contraction. Refined oil products are set to see stronger demand year on year, given the low base in 2020. India, with the worlds second largest population, continues to see leading economic indicators show signs of improvement, with higher services and manufacturing PMIs in January. This comes despite the country being the second worst hit nation in the world by COVID-19 in terms of coronavirus cases.
Moving back across the Arabian Sea to the Gulf, there is expected to be both higher production and higher demand for refined fuels in the years ahead. In Saudi Arabia the Jazan refinery startup is underway with the 400,000 b/d refinery expecting to reach 200,000 b/d of production capacity later this year. Overall total refining capacity in the Middle East is set to expand to 12 million b/d in 2023, up from 9.9 million b/d in 2019, according to S&P Global Platts Analytics. The additional product demand and supply in the region is set to boost volumes in Fujairah, the key oil trading hub for the Middle East.
Fujairah is not just a place for vessels to load and discharge their cargoes but it is also a hub for ships to buy bunkers, transfer crew and conduct maintenance work on the vessels that call at the port. With over 40 million barrels of refined product storage capacity and around 20 million barrels of crude oil storage capacity the port stands ready to deal with the regions rising requirements for fuels.
It’s not just the storage of oil and the other roles above that makes Fujairah a key hub. The port also has two independent refineries capable of producing over 500,000 mt of IMO 2020 compliant bunker fuel a month. In addition to this, the matrix manifold system allows the movement of oil from terminal to terminal without the need to load and discharge vessels when moving oil across the terminals. This efficient method of transport provides market participants a competitive edge when they look to trade material at the port they need for storage or blending requirements.
This is the fifth year of weekly stock reporting at the Port of Fujairah and last year the average weekly stock levels across all oil products hit an annual record high since reporting began in early 2017. Total refined product stocks last year averaged 23.968 million barrels on a weekly basis. This followed a severe decline in oil demand, therefore prompting more products to move into storage.
In contrast in 2019 they averaged 21.665 million barrels, while in 2017 they averaged 19.299 million barrels. Since the start of this year, combined product stocks have remained above the 21 million barrel level, with total product stocks in January averaging 22.350 million barrels.
As we look to the rest of the year ahead, a continued swift rollout of vaccines globally will help to tackle the virus which in turn will lead to a continued recovery in the global economy. The Port of Fujairah will play a vital role in this process given its role as the leading trading and oil storage hub in the Middle East.
Daniel Colover
daniel.colover@spglobal.com