Fujairah Q3 2021
Fujairah Q2 2021
Driving towards the goal of being a global energy hub
**Driving towards the goal of
being a global energy hub**
Q3 2021 | S&P Global Platts Quarterly Report **No.16**
Senior Director, Oil Europe Crude
S&P Global Platts
As a busy Hurricane Season causes widespread supply disruption in the US Gulf Coast, other parts of the world have been facing headwinds in demand. There is no doubt that oil demand is recovering as the world emerges from the Covid-19 pandemic, but uncertainty still lingers over how fast vaccines can combat the Delta variant in some parts of the world.
Predicting future demand is never easy – especially with the Covid-19 playing havoc with estimations – but the picture is gradually becoming clearer now than it has for some time. Many of the world’s major consumers are now less than 10 per cent off their pre-pandemic demand levels, and projections for demand are looking much healthier than before. According to the latest monthly reports from the International Energy Agency, oil demand could rise by as much as 1.6m barrels a day as we head into the fourth quarter, seeing continued upwards momentum towards the end of the year.
All this added volume in the market is good news for infrastructure providers, shippers, and storage and blending hubs – Fujairah chief among them. In this issue, we look at how stocks and balances at the port have been shaping up over the last quarter, and examine the role that Fujairah plays on the global stage.
Also in this edition of the magazine, we continue the exciting conversation about the evolving world of shipping fuels. As we discussed in the last issue, high sulfur fuel oil is far from done, given the further growth of scrubber installations and shifting supply dynamics keeping prices buoyant. Indeed, as the price of oil has risen in recent months, the gap between 0.5% sulfur marine fuel and 3.5% sulfur fuel oil has actually narrowed, showing that demand appears to be strong for the more traditional HSFO. Discussing fuel in this issue is Carsten Ladekjær, CEO of Glander International Bunkering. In a wide-ranging conversation, Ladekjær discusses the growing use of LNG as a fuel, as well as the prospects of more sustainable fuels, such as methanol and hydrogen. One area where Ladekjær is especially confident is the growth of Fujairah and its importance as a leading hub for the Middle East and beyond.
The increased demand in the oil markets, along with the new monthly injection of 400,000 b/d of OPEC+ crude, has increased liquidity and a strong sense of purpose in buyers. Such market activity should spark brisk trade in the main supply and bunkering hubs. It looks like a busy last quarter is on the way.
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OPEC+ agreement in focus as crude demand rises
As the summer months in the Middle East roll-on, hopes for a greater normalization of life seem to be rising. Despite concerns over coronavirus variants, it feels like there is building resiliency. This is true in both everyday life and in business, with trade flows increasing as global economies return to life.
In commodity markets, the supply-and-demand balance for crude oil continues to be a headline topic. With expectations of a tighter market in the ascendant in early July, oil prices nearly reached $80/barrel. Platts Dated Brent was assessed at $78.39/b on July 5, the highest level since October 2018, in the wake of the OPEC+ grouping of producer nations failing to reach a deal on unwinding production cuts.
Eventually, OPEC and its allies did reach an agreement in mid-July that from August they would begin adding an extra 400,000 b/d back into the market each month. The loosening of restraints was widely welcomed, although some – notably the US, where rising gasoline prices are a political tender spot – have called for a faster unwinding.
Since then, oil prices have fallen back, with the retreat gathering pace in mid-August as Brent crude slid back well below $70/b. Concerns over economic growth in China and other nations have reared up again, with lockdown measures being reimposed to counter outbreaks of the delta variant. This is leading to some anxiety over how strong the recovery in oil demand will be this year.
For now though, with the Middle East’s oil-producing nations set to increase their exports, there will be more ships needed in the region to
take the barrels to their final destinations. The Port of Fujairah has become one of the world’s leading bunkering hubs and is a key stop-off point for vessels to refuel as they leave the Middle East and travel onwards to oil-consuming nations. The last 12 months have seen close to 15,000 vessels calling at the offshore anchorage.
Bunker sales at the Port of Fujairah have been reported since March, bringing transparency to bunker sales at the port, with data going back to the start of the year.
The bunker sales data, the reporting of which is done exclusively through S&P Global Platts, is published monthly across six categories: 180 CST low-sulfur fuel oil, 380 CST low-sulfur fuel oil, 380 CST marine fuel oil, marine gasoil, lowsulfur marine gasoil and lubricants. The bunker sales data at the Port of Fujairah now has seven months of history, with the July figures showing the highest sales this year at a total 690,339 cubic meters, reflecting a rise of 2.6% month on month.
Low-sulfur fuel oil is the most popular fuel sold at the port, with sales of 536,103 cu m in July, up from 511,993 cu m in June. We are now over a year and a half since the IMO 2020 regulations came into effect, restricting the use of high-sulfur fuel oil to only vessels with scrubbers. Sales of high-sulfur fuel represents the second-highest category of fuel sold, with 119,732 cu m of high-sulfur bunkers sold in July, representing 17.3% of total bunkers sales.
Helping to provide bunker fuel to the Port of Fujairah are three independent refining units. Two of these units are largely focused on producing IMO 2020 compliant bunker fuel, with a combined capacity of over 500,000 mt/month. The third refining unit at the port produces high-sulfur fuel oil, which is sought by ships with exhaust scrubbers that visit the port for bunkering.
Besides bunkering, there is also the storage of oil, crew transfer and maintenance work done on 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 has the largest independent oil storage capacity in the Middle East.
Complementing the bunker sales data is the weekly stock reporting at the Port of Fujairah, which will reach its sixth-year milestone at the turn of next year. Stocks are reported across three categories: light distillates, middle distillates and heavy residues.
Looking ahead with optimism for a return to normality, the Port of Fujairah has an ever-increasing role as the leading trading and oil storage hub in the Middle East, with more oil set to flow out of the region in the months and years ahead. Having both bunker sales and stock levels reported means there is an unparalleled level of visibility in activity at the port and a growing set of reference data, allowing market participants to make better informed decisions.
Fujairah Bunker Sales Data
Fujairah strengthened its longstanding relationship with S&P Global Platts in 2021 to start jointly publishing monthly sales of bunker fuels and lubricants, bringing important visibility into market activity in this world-leading bunker market. This is part of the Emirate’s vision to drive increased transparency as one of the leading global oil and bunker trading and storage hubs.
The Port of Fujairah and Platts make the monthly volume of bunker sales during the previous month, freely available to the market on the 20th of each month, with history commencing from the start of 2021 at fujairah.platts.com
The bunker sales volume data is broken down across six categories covering conventional and emerging products, including 180cst low sulfur fuel oil, 380cst low sulfur fuel oil, 380cst marine fuel oil, marine gasoil, low sulfur marine gasoil and lubricants. The volumes are reported in cubic meters together with insight provided by Platts about the inventory statistics in absolute and relative terms.
The new data complements the weekly oil products inventory data on light distillates, middle distillates and heavy distillates & residues that FOIZ - acting through Fujairah Energy Data Committee (FEDCom) - and S&P Global Platts have jointly published since the start of 2017.
Platts has published independent refined product prices on a FOB Fujairah basis since October 2016, enhancing transparency for market participants.
*S&P GLOBAL PLATTS & FUJAIRAH*
The evolution of
S&P GLOBAL PLATTS & FUJAIRAH
The evolution of
The rise of the Middle East as a major trading and refining hub, at the epicentre of energy demand, quickly marked the region out as the fulcrum in rapidly evolving global energy trade flows. The ambition that has underpinned the expansion of Fujairah as a significant logistics hub has helped reshape those energy flows, even as the trade flows were reshaping Fujairah.
The Port of Fujairah today hosts key market makers while the presence of tanks for blending and storage, pipelines, deep water port facilities, the presence of refining facilities that can produce IMO 2020 compliant fuel and its geographic position at the crossroads of international trade mean it has emerged as a vibrant marketplace.
The port of Fujairah has emerged as a vibrant marketplace."
For S&P Global Platts, such credentials are the hallmark of benchmark pricing services – the provision of robust, independent price reporting driven by transparent market-derived price information – and the drive towards lower sulfur fuel oils as part of the IMO’s 2020 changes will only consolidate that position.
Long an important cog in the provision of bunker fuels to the marine world, S&P Global Platts isn’t new to the Middle East – its first Kuwait-based bunker fuel assessments were launched in 1986, with Khor Fakkan assessments launching in 1989, followed by Fujairah as far back as 1994. As refining in the region has intensified and improved, fuel oil assessments were joined by jet fuel and gasoil assessments, along with propane and butane in 1998, with naphtha and gasoline completing an impressive pricing suite by 2008.
Now, the start of the new decade has brought with it a cut in sulfur levels to 0.5% for marine fuels – and, once again, Platts and the Port of Fujairah are at the forefront, with the launching of a suite of Marine Fuel 0.5% assessments reflecting the value of IMO 2020 complaint fuel at the port.
When you consider that marine fuels contribute 6% of total global oil demand, you realize the impact this change is having on the entire oil complex as around 3.2 million barrels a day of barrels of heavy, high sulfur residual fuel demand has had to be replaced by lower sulphur fuel that is compliant with the new IMO 2020 regulations.
Platts assesses premiums
for spot market differentials
Recent changes to Middle East
S&P Global Platts Middle East
product pricing changes
S&P GLOBAL PLATTS & FUJAIRAH
Platts has a full suite of Marine Fuel maximum 0.5% sulfur assessments in Fujairah, covering the various ways the IMO-compliant fuel is sold. The first assessment is a cargo assessment which reflects the largest parcels the fuel trades in, often before it is exported to further afield.
Platts also has bunker assessments at the Port of Fujairah that it launched in July 2019. The first is for ex-wharf bunkers which are parcels sold onto bunker barges and the second assessment at the port is for delivered bunkers. In addition to the physical cargo and bunker assessments, Platts in May 2019 launched assessments for financially settled derivative contracts at the port which settle against the average of the physical cargo assessment.
Platts in October 2016 launched independent price assessments on an FOB Fujairah basis for cargoes of 95 RON gasoline, gasoil, HSFO 380 CST and kerosene. Most recently in September 2020 Platts launched 95 RON gasoline cargo and naphtha cargo assessments on an FOB Fujairah basis.
S&P Global Platts partnership with the Port of Fujairah to publish the Fujairah oil inventory data gives unparalleled transparency over the activity in the port.
As of Monday, August 23 total oil product stocks in Fujairah stood at 18.278 million barrels falling by 1.138 million barrels week on week. Overall product stocks fell by 5.9% with draws across middle distillates and heavy residues while light distillates posted a slim build. Stocks of heavy residues fell by 11.1%, falling by 1.082 million barrels on the week to stand at 8.687 million barrels. Heavy residues are the single largest category of stocks with light distillate stocks second, standing at 5.631 million barrels.
Were you aware of IMO 2020's shift to replace heavy, high sulfur residual fuel?
- Yes, absolutely.
- I had heard about it.
- No, I was not aware.
HSFO demand in Asia remains,
even amid push for cleaner fuels
• Singapore’s HSFO sales in August robust
• Sri Lanka, India ports ramp up HSFO supply
• Scrubbers crucial to meet 2030 milestone: Platts Analytics
By Surabhi Sahu
Senior Editor, Refined S&P Global Platts
Contrary to initial expectations, Asia’s high-sulfur fuel oil market is witnessing a resurgence in demand, with many smaller ports and bunker players starting to offer the grade given amid a favourable Hi-5 spread that has lured shipowners to install scrubbers.
This ongoing thirst for HSFO comes despite a big push toward cleaner fuels following the International Maritime Organization’s global sulfur mandate and its impending rules relating to decarbonization.
In Singapore, the world’s largest bunkering port, HSFO bunker sales, which includes 180 CST, 380 CST and 500 CST grades, were mostly steady on the month in July but were up almost 7% year on year to 1.06 million mt, contributing for about 26% to total marine fuel sales, data from the Maritime and Port Authority of Singapore showed. Singapore’s HSFO sales over January-July jumped 33.7% on year.
“We are seeing a pick-up in inquiries from shipowners for HSFO bunkering at Singapore as there is tight availability at Fujairah, coupled with competitive delivered HSFO pricing at Singapore,” a Singapore-based trader said.
The discount for Singapore-delivered 380 CST HSFO to that of Fujairah widened from the July average of $6.82/mt to minus $15.83/mt over Aug. 1-19, Platts data showed.
Singapore’s August HSFO bunker sales will likely be similar or even slightly better than July, a market source said.
Ports in nearby India and Sri Lanka have also seen a marked increase in inquiries and are trying to emulate Singapore’s HSFO success by ramping up
“HPCL is offering HSFO 380 CST at Mumbai, Kochi, Kandla and Vizag [Visakhapatnam] with fine avails,” a company source told Platts. offers as demand for the grade accelerates.
“Compared with last year, we are experiencing almost double the orders for HSFO, mainly from scrubber-fitted container vessels. There are three to four big inquiries.”
At Kochi, HSFO demand stands at around 2,000 mt/month, a Mumbai-based bunker trader said, after no HSFO availabilities in the last four to
five months. In Sri Lanka, Advantis Bunkering became the first supplier of delivered HSFO at Colombo port, banking on a long-term increase in calls by scrubber-fitted vessels, a company source said recently, with “multiple inquiries” from major shipping companies since launching delivered HSFO sales.
Advantis has secured a sale for 1,200 mt to be delivered between Aug. 25-30, another company source said. “Demand is picking up given the firm inquiries that are coming in.”
A physical bunker supplier with a substantial market share at the port of Colombo said that a plan to offer delivered HSFO is “currently in the works”.
Srubbers' uptick brightens HSFO outlook
The continued installation of exhaust gas cleaning systems, or scrubbers, is supporting HSFO demand.
Increasing familiarity of the technology and clarity of its benefits in tackling GHG emissions has diminished initial scepticism in its use.
According to the Clean Shipping Alliance, a recent study by CE Delft found the increase in CO2 footprint from the additional refining of marine gasoil to likely be in the range of 10%-15% and potentially as high as 25%. By contrast, the increased CO2 from EGCS is only in the 1%-1.5% range. Furthermore, the EGCS technology achieves much lower sulfur output than required by the IMO 2020 rule.
While companies are eager to use low-carbon fuels when they become available for sustainable shipping, scrubber technology remains a key component in meeting the 2030 milestone, S&P Global Platts Analytics said earlier this month.
The current scrubber fleet numbers about 4,500, but if clean alternative fuels do not achieve adequate penetration by 2030, this number could escalate to close to 7,000, Platts Analytics estimated.
The price differential between HSFO and Marine Fuel 0.5% sulfur, also known as the Hi-5 spread, has favoured the use of scrubbers.
In Singapore, this Hi-5 spread averaged $298.90/mt in January 2020 as the market transitioned to the IMO 2020 mandate. It narrowed to average as low as $60.32/mt in September 2020, but recovered to average $103.33/mt in January 2021, according to Platts data. This year up until July, the spread has, on a monthly basis, averaged mostly over $100/mt, and $111.44/mt over Aug. 1-19.
Promoting Fujairah storage data
Platts Fujiarah Oil Inventory Dashboard
Since the launch of the Fujairah Oil Inventory Dashboard in January 2017, the number of unique viewers to the website has stabilized at an average of 140 to 170 per week. In addition, many of these unique visitors are returning on a weekly basis, indicating that the Fujairah Inventory data has established itself as a valuable source of market information. The heat map shows the home countries of visitors to the Fujairah Oil Inventory Dashboard during the past six months underlining the global interest.
We have continued to raise awareness of Fujairah and its Storage Data through PR, social media, advertising, events and conversations with our channel partners.
Our public relations partner Gulf Intelligence has maintained regional focus and presence, with some of the online and offline coverage featured:
Social Media Clippings in Q2 2020
Fujairah Storage Data Weekly Infographs 2020 & 2021
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Peter Galbraith is Commercial Director and Regional Head Middle East for S&P Global Platts. Peter joined S&P Global Platts in April 2017 and is responsible for leading regional initiatives as well as the growth of the Middle East S&P Global Platts business. Peter has more than 19 years experience in commodities, global banking and financial services across Europe, Middle East, Africa and Australia. Prior to SP Global Platts Peter held commodity sales roles at Thomson Reuters and FIS before joining SP Global Platts. Peter holds a BA Commerce degree from University of Wollongong and a Diploma of Financial Planning from Deakin University.
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Dan joined S&P Global Platts in 2008, covering oil markets for S&P Global Platts out of London. In 2013, he transferred to Singapore where he took on an oil management role, and then moved into a role serving as S&P Global Platts market engagement development lead for oil in the region. In 2016 Dan was appointed as Associate Editorial Director for crude and fuel oil markets in the Asia region.
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Jamila Al Ibrahim is the Client Development Manager,Middle East for S&P Global Platts in Dubai.Jamila joined Platts in April 2016 as associate Editorial Operations Analyst in London, before progressing the same year to the role of Associate Editor for the Dry Bulk Shipping desk, covering pricing and news for the Atlantic markets.She then held the role of Editor for the European and Turkish Ferrous Metals markets in 2018,while the following year she joined the EMEA Power team as a Managing Editor, covering Energy Transition, Renewables, Guarantees of Origins and Hydrogen news and pricing. Prior to joining S&P Global Platts, Jamila held the role of Research Manager for Banking System Profiles at Moody’s Investors Services in London.
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Tahani has more than 14 years’ experience in geopolitics, technology and financial services spanning Europe, Asia, the Middle East and Africa. Prior to SP Global Platts Tahani held editorial roles at Google, Thomson Reuters and The Wall Street Journal. Tahani holds a MEng Biochemical Engineering degree from University College London and speaks fluent Arabic.
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