Fujairah Hub Faces Stiffening Competition as Middle East Bunker Market Evolves

The Middle East’s bunker market is gradually evolving with more refueling options, posing challenges for the UAE’s bunker hub Fujairah, as competition among domestic players increases. The emergence of alternative refueling options at strategic locations and a recent growth in bunkering activity outside port limits off the coast of Fujairah could exert downward pressure on Fujairah’s market. Additionally, macroeconomic headwinds have contributed to a slowdown in LSFO bunker demand since February.

Fujairah’s bunker sales for the first half of 2023 totaled 3.617 million cubic meters, down by 10.5% compared to the same period in 2022 and 9% below the first half of 2021, according to data from the Fujairah Oil Industry Zone and S&P Global Commodity Insights. Moreover, bunker sales volumes in 2022 slipped by 1.5% compared to 2021, reaching 8.109 million cubic meters.

Market participants have noted the emergence of alternative refueling options around the region. For example, Minerva Bunkering and Aramco Trading have started collaborations to refuel vessels around Saudi Arabia’s Yanbu port. While Yanbu and Jeddah have a history of bunker supply, it will take time for them to establish themselves as serious contenders. Similarly, Oman’s bunkering operations are still in the developmental stages and may become more active in the longer term.

Regional tensions with Qatar have also impacted Fujairah’s bunker demand, dislodging a significant segment of it that has yet to be fully replaced. However, Oman’s bunker market is expected to experience steady growth in the long term, with strategies in place to develop infrastructures such as storage and barges, which could lead to healthy demand conditions.

One of Fujairah’s licensed bunker suppliers has reportedly relocated a barge to Saudi Arabia’s port of Yanbu for bunker supply. This highlights the intense domestic competition and the importance of regional competition within the Middle East.

The regulatory oversight around Khor Fakkan, a port located nearby Fujairah, is seen as less stringent compared to Fujairah hub. As a result, fuel oil cargoes of sanctioned origins are more likely to find their way into floating storages situated along these neighboring ports. Some players prefer to set up refueling options at Khor Fakkan instead of obtaining bunkering licenses to provide supply at Fujairah port, aiming to divert bunker demand from Fujairah.

The Platts Fujairah-delivered 380 CST HSFO bunker premium over the FO 380 CST 3.5% FOB Arab Gulf cargo assessments has experienced a significant drop, indicating a more complicated market and low demand in Fujairah. Some traders have adopted aggressive selling tactics, accepting low bids and capturing almost all the inquiries, leading to increased term contractual volumes and reduced spot trades.

Fujairah’s downstream market may face further pressure with the completion of Kuwait’s Al-Zour refinery’s third and final crude distillation unit. This refinery’s potential future LSFO imports could further depress sentiments in Fujairah’s downstream market.

While Fujairah remains a significant player in the market, the increasing regional competition and potential future LSFO imports present challenges for its bunker hub status. The hub’s response will require the development of several infrastructures, consuming time, investments, and commitments. Despite the challenges, Fujairah’s strategic location and infrastructure will continue to play a vital role in the Middle East’s bunker market.

Read mre

Pakistani Airline Introduces Flights to Dammam: A Convenient Travel Option

Leave a Reply

Your email address will not be published. Required fields are marked *

Emiratisation Details For UAE Business Know About Corporate TAX-UAE