Bunker market participants in the UAE's Fujairah, the Middle East's largest marine fuels port, are braced for a dramatic fall in demand and trading activity following the most significant escalation in years in the Mideast Gulf and disruption to vessel traffic.
Fujairah, a key supplier of bunker fuels for ships travelling through the Strait of Hormuz and also the third largest oil and products storage centre in the world, has not been targeted by the Iranian military as of today, 1 March, unlike the UAE port of Jebel Ali and other regional hubs.
Shipping activity in the Mideast Gulf has been slowing down, in particular after unverified warnings about the closure of vessel traffic through the Strait of Hormuz.
"More and more customers are cancelling and avoiding the area," a Dubai-based bunker trader said. "We have been mostly dealing with cancellations this weekend."
Earlier today, Palau-flagged bunker barge Skylight was hit 67 miles to the north of Fujairah, and debris from a missile fell near another vessel in Jebel Ali.
Some war risk underwriters put vessel insurance policies on hold, shipping sources told Argus, with the possibility of policies being cancelled altogether.
"The cost of war risk premiums will surge, making travel here too costly for shipping firms," a Fujairah bunker supplier said.
Iranian strikes on the UAE also pose a question about future supply of bunker-grade high-sulphur fuel oil (HSFO) from Iran, which has been a key supplier to Fujairah despite US-led sanctions.
"Future trading ties with Iran will depend on how and/or on what terms the conflict ends," one trader said.
