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.
Daniel Colover
daniel.colover@spglobal.com