Shipping companies have grown reluctant to call at the port of Fujairah in the UAE, prompting cancellations of oil cargoes that Adnoc is then reselling at higher prices, Bloomberg has reported, citing anonymous sources.
Per the report, Nippon Yusen KK and an unnamed European shipping company are among those unwilling to send their ships to Fujairah, even though the port city is outside the Strait of Hormuz—but still too close for comfort, it seems.
Bloomberg noted in its report that Fujairah has been targeted several times since the war started, with one of the strikes causing a fire in the city’s oil zone after a missile was intercepted and shrapnel fell in the area.
The publication’s sources said the situation had prompted traders to cancel some cargoes out of Fujairah and return the oil to Adnoc, which then places the cargos on the spot market, where they could fetch a much higher price than the official Murban selling price for March, which was $63.99 per barrel. Murban crude currently trades at over $99 per barrel.
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Even with the spot market, however, Middle Eastern oil producers have had to start cutting production as tanker traffic via the Strait of Hormuz remains largely non-existent. Conflicting reports from senior U.S. officials about possible Navy escort for oil tankers has only served to deepen already considerable supply uncertainty among traders and analysts.
Amid these conflicting signals, Middle Eastern oil states have reduced their combined oil production by as much as 5 million barrels daily, as their storage tanks fill up and there is nowhere to put the oil. Even Saudi Arabia, which has an alternative export route via a pipeline to the Red Sea coast, was reported to have started ramping down production at two fields earlier this week. In the UAE, production has been cut by between 500,000 bpd and 800,000 bpd.
By Charles Kennedy for Oilprice.com
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