Fujairah Weekly Oil Inventory Data Stocks Level as of Sept. 25, 2017

Middle distillates rebound from lowest recorded level

Chart Attribute: Fujairah Weekly Oil Inventory Data (as of Sep 25, 2017) / Source: The Gulf Intelligence

Fujairah's commercial stocks of refined oil products totaled 19.292 million barrels in the week to Monday, edging up 1.6% on the week despite a substantial drop in light distillate inventories. The stocks have remained below 20 million barrels for a fifth consecutive week since hurricane-related refinery shutdowns in the US Gulf Coast region rocked global oil products markets, data released Wednesday by the Fujairah Energy Data Committee showed. Stocks of light distillates, mainly gasoline and naphtha, fell on the week by 707,000 barrels, or 12.4%, to an eight-month low of 5.002 million barrels. Gasoline demand East of Suez is strong, with roughly half the outflow from Middle East stocks being consumed in the region itself with the rest going to Singapore, with the recent flow to Asia probably stoked by robust demand for gasoline from Indonesia and Vietnam.

Gasoline demand is likely to remain elevated in the Middle East in coming months, as the swing to cooler temperatures throughout the region, following an especially sweltering summer, is expected to result in the usual seasonal upswing in driving activity. In addition, repairs continue to a fire-damaged residual fluid catalytic cracking (RFCC) unit at Abu Dhabi National Oil Co.'s 800,000 b/d Ruwais refinery, which has been out of commission since January and is not expected to be returned to production until 2019.

Chart Attribute: Fujairah Weekly Oil Inventory Data (Jan 9 - Sep 25, 2017) / Source: The Gulf Intelligence

GASOLINE DEMAND

The damage to the RFCC unit has reduced the refinery's yields of light and middle distillates. S&P Global Platts estimates that about 230,000 mt/month of gasoline production capacity was lost at Ruwais due to the January fire. Another near-term driver of gasoline demand in the Middle East market is the current planned and unplanned maintenance and repairs being undertaken at Iran's giant South Pars gas and condensate field. Platts estimates that October South Pars exports could slip 30,000-40,000 b/d due to unplanned field maintenance related to a pipeline leak at one of the production platforms. Market traders and South Korean end-users said they expected South Pars condensate exports to return to normal seasonal levels in November and December.

As of Tuesday, the first/second-month structure for Arab Gulf Gasoline 95 swaps was in a backwardation of $1.20/mt. Fujairah stocks of middle distillates rose 197,000 barrels, or 8.1%, on the week to 2.621 million barrels. The rise followed the previous week's 19.1% draw to the lowest since the start of Fujairah weekly stocks reporting in early January.

They remain well below this year's average level to date of around 3.7 million barrels, with tighter global supply fundamentals related to the particularly severe US hurricane season. Europe continues to draw middle distillate barrels from the Middle East and Asia as US supplies remain tight. The east-west Gasoil Exchange of Futures For Swaps (EFS) over the past two weeks has averaged minus $27/mt, well above the minus $15/mt that typically indicates an open arbitrage window for Asian and Middle East gasoil cargoes to Europe.

BACKWARDATION

US Gulf Coast refineries have begun to recover from the hurricane disruptions that followed Harvey's landfall in late August, but the latest weekly US data showed distillate production at 4.54 million b/d -- still some 500,000 b/d lowest than pre-Harvey levels. Fujairah's stocks of heavy distillates and residues, which constitute more than half the total oil products inventory at the port, rose on the week by 820,000 barrels, or 7.6%, to a six-week high of 11.669 million barrels, in their biggest move in more than a month.

Bunker demand in Fujairah was reported as muted this week. The recent rally in Brent price to a two-year high of $58-$59/b has had a dampening effect on buying interest, as bunkers users pulled back in anticipation of a correction. Regional power generation demand in the Middle East has begun to ease from the highs of summer, which should increase fuel oil availability heading into the fourth quarter. But global fundamentals for fuel oil are seen as somewhat tight, with supply tightness most apparent in Mexico, Venezuela, the US Gulf Coast and Russia.

About the S&P Global Platts and FOIZ Fujairah Data Project:

The Government of Fujairah in 2016 announced a plan to publish weekly data on refined products held at onshore commercial terminals at Fujairah as part of its effort to position the Indian Ocean port as a global oil trading and storage. It appointed S&P Global Platts to distribute the weekly inventory data. FEDCom was established by the Fujairah Oil Industry Zone to collect, verify and distribute inventory data to replicate the data sets provided at other global trading centers such as Singapore and Rotterdam. Fujairah has about 41.5 million barrels of commercial oil product land storage available for leasing.

About The Gulf Intelligence

Gulf Intelligence is a strategic communications & research firm effective across the full value-chain of the Middle East Energy Sector – we facilitate knowledge exchange and advance the business interests of national and international stakeholders operational in the regional industry