FUJAIRAH DATA: Oil product stocks climb to six-week high amid subdued demand

Stockpiles of oil products at the UAE's Port of Fujairah climbed to a six-week high as of June 3 amid signs of slow demand for fuel oil from the shipping sector and power plants, according to data from the Fujairah Oil Industry Zone and latest ship tracking data.

Total inventories rose 5.9% to 21.573 million barrels in the week ended June 3, the highest since April 22, the FOIZ data published June 5 showed. Stockpiles have increased 24% since the end of 2023.

Stocks of heavy distillates and residues used for power generation and ship fuel increased 5.8% over the week to 10.704 million barrels, marking a six-week high.

The rise in heavy distillates was attributed to slow ship fuel demand and not a significant increase in the shipment of fuel oil for power generation in the Middle East despite rising temperatures in summer when demand for fuel oil and crude burn increases.

Fuel oil exports from Fujairah averaged 100,000 b/d in May, up from 51,000 b/d in April but well below 142,000 b/d in March, according to S&P Global Commodities at Sea data. Meanwhile, Saudi Arabia has booked 150,000 barrels for June, well above its average of 5,000 b/d for May and the highest since December, and Kuwait has yet to import any fuel oil from Fujairah since September, CAS data showed.

Inventories of middle distillates such as diesel and jet fuel rose 14% on the week to 3.724 million barrels, a seven-week high, while light distillates increased 2.4% to 7.145 million barrels, the most in four weeks.

However, an uptick in power demand for high-sulfur fuel oil in Fujairah is expected in the near term, traders said.

Kuwait's 615,000 b/d Al-Zour refinery has been able to meet domestic power plant demand with its LSFO production, said Ali Mohammad al-Ajmi, a spokesman for the refinery's owner, Kuwait Integrated Petroleum Industries. Al-Zour reached its maximum capacity in February this year after commercial operations began in November 2022, S&P Global Commodity Insights reported earlier.

"The availability of low-sulfur fuel oil from Al-Zour refinery plays a pivotal role in meeting the energy requirements of Kuwait power plants," Ajmi said. "With its significant production capacity, Al-Zour refinery has successfully ensured a sufficient supply of LSFO to cater to the power plants' needs. Furthermore, the surplus LSFO production allows for potential exports, which can contribute to the economic growth and development of Kuwait." Al-Zour, which only produces LSFO, not HSFO, can meet all demand from the region and internationally in the next few months, he added.

Shipping demand

As for shipping demand, low-sulfur fuel oil activity remained slow, and the usage of HSFO was mostly stable, traders said.

Demand for LSFO has been "patchy" and prompt barging slots for refueling are being offered within five days, compared with seven to eight days, when demand is relatively stronger, bunker suppliers said.

The Platts-assessed Fujairah-delivered marine fuel 0.5% sulfur bunker premium over benchmark FOB Singapore marine fuel 0.5%S cargo fell to a four-month low of $7.21/mt May 30, but since then has increased up to $12.51/mt as of June 4, the highest since May 8, Commodity Insights data showed.

Fujairah's LSFO bunker premiums averaged $10.23/mt in May, down from $15.51/mt in April, while the June average so far has been at $10.99/mt.

With Fujairah's HSFO supply outlook seen as improved for early June from the last month, traders have been expecting steady bunker demand.

So far, since the end of 2023, stocks of light, heavy and middle distillates at Fujairah have climbed 52%, 5.5% and 47%, respectively.