Fujairah loadings plummet as drone attacks rock UAE port prompting tanker rethink
DRONE attacks on the UAE’s port of Fujairah have deterred tankers from lifting Murban crude oil as loading volumes at the port plummet.
Vortexa data shows a sharp decline in loadings at the port of Fujairah last week as continued attacks disrupt port operations.
Loadings between March 9 and March 15 were 66% lower than the 1.9m barrels per day loaded on to vessels between March 2 and March 8.
UAE’s national oil refiner ADNOC was keen on raising crude tanker loadings at Fujairah by diverting barrels from other UAE export points inside the Strait of Hormuz, such as Ruwais port in Abu Dhabi, to minimise the impact of recent attacks on its export flows.
The pipeline has a capacity of 1.5m barrels per day. Price reporting agency Argus Media also reported that the UAE was stretching capacity by an additional 0.2-0.3m barrels per day.
But attacks on the Fujairah Oil Tanker Terminal have disrupted operations, with the port intermittently suspending loadings from FOTT last week.
Today’s Middle East port update reported suspended operations yet again, following drone attacks on March 14 and March 16.
Two of the eight storage tanks at the port of Fujairah are understood to have been hit, removing 2m barrels per day of storage capacity. Vopak’s bulk liquids terminals have also suspended activity.
ADNOC this week also released official selling prices for April loadings of its murban crude oil at $69.45 per barrel, imposing a flat price across all grades of crude oil.
This was a move that was met with confusion by crude oil buyers, the charterers of tankers.
Onyx Capital Group managing director Jorge Montepeque said that an industry player took ADNOC’s pricing as a signal that “April cargoes will not be loaded”.
“At this moment no cargoes are loading out of Jebel Dhana inside the Middle East Gulf and if the war continues then the presumption is that nothing will be loaded as the Strait of Hormuz remains shut,” Montepeque said.
Bearish outlook for Fujairah loadings
The risk for Fujairah loadings remains high as indiscriminate attacks continue in the strait.
With vessels near Fujairah also being attacked, this is adding more regional uncertainty.
Security firm Vanguard noted that Kuwait-flagged LPG tanker Gas Al Ahmadiah (IMO: 9849629) was hit by an unknown projectile while at anchor about 23 nautical miles east of Fujairah in the early hours, UAE time, of March 17.
Costs for charterers are likely to increase as tanker owners look to charge more for putting their assets in a risky region, despite time charter equivalent rates already reaching record highs.
“The increased attacks are likely to drive up insurance costs, in addition to the already high premium set for vessels entering the Middle East Gulf,” a tanker player told Lloyd’s List.
Unfavourable economics, with arbitrage windows likely to be closed, could dissuade traders from taking a gamble on lifting Murban crude at Fujairah.
Red Sea surge insufficient as tankers head to Atlantic Gulf
Crude oil liftings in the Middle East are unlikely to go away despite widespread attacks on vessels and infrastructure.
Shipbrokers observed a rise in Yanbu loadings since the conflict began as carriers avoid the SOH.
Aramco similarly pushed pipeline throughputs, raising it to maximum capacity to ease the inventory pile up its east coast refineries are facing from the SOH attacks.
But it will not be enough to solve the current oil shortage.
Vantage Shipbrokers’ research team said: “Although flows through Yanbu have doubled to around 2.7m barrels per day in March, Saudi crude exports are still less than 40% of pre-war levels.”
And exports are likely to remain suppressed with the pipeline’s limited capacity throughput, leaving a net 5m barrels per day for exports.
Vantage also noted UAE crude exports fell 40% despite the initial rise in Fujairah loadings, doubling to 2m barrels per day for March.
Another shipbroker, EA Gibson, on Friday noted that “it remains to be seen how large an actual increase in shipments from Yanbu will be. Nonetheless, even if volumes increase substantially, a significant portion of MEG barrels will remain shut in,” echoing that diversions in the Middle East will be insufficient to replace lost barrels.
To plug the supply gap, industry players initially expected a rise in tonne-mile demand for sailings from West Africa and Latin America. These regions were touted as potential replacements for lost loadings in the Middle East.
But exports have stayed mostly flat.
Vantage saw West African exports rising by only 100,000 barrels per day to 3.6m bpd in March when compared to last year’s average, while Latin American exports increased slightly by 300,000 bpd to 6.1m bpd.
The same can also be seen for US crude oil exports which have yet to rise sharply despite the rise in vessels ballasting in the Atlantic Gulf.
Exports have declined to 3.6m barrels per day in March, 200,000 barrels per day lower than last year’s average, according to Vantage.
But this could soon change, if the conflict is prolonged.
Poten & Partners noted that the International Energy Agency’s plan to release barrels from storage will favour US crude oil exports.
“The US is the largest contributor to the current 400m barrel release with 172m barrels, all coming from the government-owned Strategic Petroleum Reserve,” it said in a note on Friday.
It added that the US release will be the most important for tanker markets given that they are “most likely to be shipped overseas”.
Poten also sees most of these barrels heading to Asia with 80% of Middle East crude oil flowing into the continent.
“If India, South Korea and/or China are the buyers of incremental barrels from the US, this could benefit long-haul very large crude carrier demand and support freight rates as long as a material portion of the global tanker fleet remains stuck in and around the MEG,” it said.
But it also cautioned that a prolonged SOH closure could cause oil demand destruction and threaten the long-term health of the tanker market.
Vantage is already seeing more VLCCs ballast in the Atlantic Gulf as they prepare for more exports. It also noted that the US oil rig count had increased by five since the conflict began, “suggesting some modest near-term production growth”.
Content Original Link:
" target="_blank">
