Fujairah bunker shortage fears subside

The UAE port of Fujairah is amply supplied with International Maritime Organisation (IMO) compliant marine fuels, alleviating concerns raised at the start of the year that the Middle East's bunkering hub could experience a supply deficit.

This change has coupled with weak demand in recent weeks to push the price at Fujairah of 0.5pc sulphur fuel oil, compliant with new IMO sulphur limits, into a discount to equivalent bunker prices in Singapore. Delivered 0.5pc sulphur bunker prices traded at premiums of between $60-100/t to Singapore prices during much of December; this flipped to discounts below $30/t earlier this month.

New production outlets in India and Kuwait added to availability, and the operators of Fujairah's two refineries, German firm Uniper and trading company Vitol, largely met local demand. Uniper's regular exports of low-sulphur fuel oil to Singapore could be reduced if a change in tax regulations enables Chinese producers to feed demand there.

Indian state-controlled refiners IOC, BPCL, MRPL and HPCL have been selling more marine-grade low-sulphur fuel oil cargoes since the end of January. This week, Kuwait's state-owned marketing firm KPC made its debut offer of 0.5pc sulphur marine fuel — a 36,000t cargo for loading at the end of February.

Temporary and seasonal factors, like the protracted lunar new year holidays and the wider effect of the coronavirus outbreak, have been eating into bunker demand at Fujairah. But the major reason for reduced sales volumes is a change in shipping firms' marine fuel buying strategies. Vessel owners are avoiding bulk purchases in an attempt to minimise exposure to volatile prices, and are instead buying just enough to complete their journeys.

"We have 30,000-40,000t of the product in stocks, and have not been able to clear it quickly. Most of the enquiries are for 300-600t because shipowners no longer buy big quantities of fuel, like they used to with HSFO," a bunker trader said.

This glut of low-sulphur bunker fuels has narrowed the spread between delivered 0.5pc sulphur and high-sulphur fuel oil (HSFO) prices in Fujairah to below $190/t this week, from near $500/t at the beginning of 2020.

Still, 0.5pc product remains the bunker fuel of necessity. Of the spot deal volumes submitted to Argus by Fujairah suppliers in January, 73pc was for the IMO-compliant fuel, 23pc for HSFO and just 4pc for low-sulphur marine gasoil (MGO).

Demand for HSFO has been stable at comparatively weak levels since mid-December.

Only three of 53 barges operating in Fujairah are dedicated to HSFO deliveries, with firms Akron and MEE the only sellers able to supply scrubber-equipped vessels, according to industry participants.

"There is little sense in keeping a barge full of HSFO for weeks on end, waiting for a couple of enquiries we may not even win," a bunker supplier said.

By Elshan Aliyev