Fuel oil exports from the Middle East are expected to rebound to a four-month high this month as tanker traffic through the Strait of Hormuz picks up and key fuel oil producers Iraq, Saudi Arabia, and Oman have moved to increase shipments from ports outside the Persian Gulf.
Middle Eastern fuel oil exports are set to jump by 20% from May to about 508,000 barrels per day (bpd) in June, according to ship-tracking data reviewed by Reuters.
Saudi Arabia boosted fuel oil shipments from the Yanbu port on the Red Sea, and Iraq started exporting fuel oil from Syria’s Baniyas port for the first time in March. Iraqi fuel oil exports from the Syrian port reached a record high of more than 600,000 tons this month.
Separately, Oman is boosting its fuel oil shipments and is estimated to be sending out the highest volumes in over two years.
The expected shipments in June, equal to 2.4 million metric tons, would still be half the fuel oil volumes the Middle East was sending outside the Gulf before the war. Until February, Middle Eastern producers typically exported between 5.5 million tons and 6 million tons on average per month.
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Despite the rise in fuel oil shipments and further increases expected in the coming weeks as the Strait of Hormuz tentatively reopens, the volumes of fuel oil leaving the Middle East may not reach pre-war levels anytime soon, analysts say.
Shippers and traders are expected to remain cautious amid heightened uncertainty about how the U.S.-Iran negotiations will proceed, according to Palash Jain, Middle East oil consultant at FGE NexantECA.
“Fuel oil flows through the Strait of Hormuz are expected to increase over the next 60 days, but the recovery is unlikely to be substantial,” Jain told Reuters.
While the Middle East ramps up fuel oil shipments, Saudi Arabia continues to snap up high volumes of Russia’s fuel oil as the Hormuz crisis has forced shut oil and gas wells and reduced domestic supply for power generation amid rising temperatures.
By Charles Kennedy for Oilprice.com
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