As the end of the year fast approaches it gives us an opportunity to look back and reflect on the year gone by. Going into the start of 2021 there were hopes that life would start to go back to normal as vaccines were rolled out, with lockdowns becoming a thing of the past. The emergence of new variants of the coronavirus started to test that theory, but as the year went on concerns over these variants started to subsid and life - and business - looked to be back on track to normality in many parts of the world.
However, recent higher case rates in parts of Europe, leading to the resumption of lockdowns indicate that we are sadly far from the end of the pandemic, with those shoots of normality in some places receding.
In the Middle East it has been an eventful year, with the region’s role as a critical supplier of crude and refined products to the world, commodities needed for the world’s economy to function effectively daily, as ever a major focus. Crude oil prices have rallied since the start of the year, from a $50/b range in the first quarter to move in the fourth quarter around $80/b range, as global demand has recovered to near prepandemic levels and supply has become tighter. These higher crude prices should stimulate more production and indeed OPEC and its allies have committed to add extra oil onto the market, although not as fast as some consumers would like. Most recently, on November 4, OPEC+ stood firm on boosting crude output quotas by 400,000 b/d for December, as it continues to ratchet back production cuts that were first imposed during the early stages of the pandemic when prices plunged.
The market keeps a close eye on production levels and the October OPEC+ Platts production survey, indicates that OPEC and its allies have boosted crude oil production by 480,000 b/d in October, as OPEC’s 13 countries pumped 27.55 million b/d, up 260,000 b/d from September, while Russia and eight other partners added 13.66 million b/d, up 220,000 b/d.
With consumers feeling the pressure of higher prices there is some political pressure being exerted to lower fuel prices, with some countries raising subsidies or bringing back the regulation of fuel prices. Another strategy that some countries are undertaking is to release strategic stockpiles as they seek to ease supply tightness and put downward pressure on oil prices.
Turning to the Port of Fujairah which is one of the world’s leading bunkering hubs and is a key stop-off point for vessels to refuel as Fujairah they leave the Middle East and travel onwards to oil-consuming nations, it has also seen advances this year, with developments in both physical infrastructure and data reporting.
For physical infrastructure developments in Fujairah, one development is the project to link the ADNOC Murban crude terminal to the Port of Fujairah infrastructure, which will allow Murban crude to be both stored at the port’s terminals and exported from its berths.
Another development has been BPGIC commissioning and starting operations at its new 600,000 cubic meter storage facility at the Port of Fujairah, bringing its total capacity to around 1 million cu m. The phase two storage facility can store fuel oil, clean products and crude. A further development underway is that Fujairah Oil Terminal, or FOT, has begun a $45 million project to connect its crude oil tanks to the port’s VLCC loading facility via the Matrix Manifold 2.
In data reporting developments, 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, low-sulfur marine gasoil and lubricants.
The bunker sales data at the Port of Fujairah now has ten months of history, with the October figures showing a fresh record high for sales this year at a total 782,060 cubic meters, reflecting a rise of 22% month on month.
Low-sulfur fuel oil is the most popular fuel sold at the port, with sales of 606,666 cu m in October, up from 487,906 cu m in September. We are nearly two years since the IMO 2020 regulations came into effect, restricting the use of high-sulfur fuel oil to only vessels with exhaust scrubbers. Over time the amount of vessels with scrubbers installed is slowly ticking up and we can see that sales of high-sulfur fuel represent the second highest category of fuel sold, with 135,150 cu m of high-sulfur bunkers sold in October, accounting for 22.3% 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.
Complementing the bunker sales data is the weekly stock reporting at the Port of Fujairah, which is approaching its sixth-year milestone in the new year. Stocks are reported across three categories: light distillates, middle distillates and heavy residues.
Looking towards 2022, with oil demand continuing to head to pre-pandemic levels and continued optimism within the region that there is a return to normality, the Port of Fujairah is set to have an exciting year as its infrastructure continues to grow and its role as the leading trading and oil storage hub in the Middle continues to develop. This year has seen the launch of the bunker sales reporting and, coupled with the stock level reporting entering its sixth year, this is building up the reference data at the port, allowing market participants to make decisions as they have the relevant insight into activity at the port.