April 6, 2020 [Argus – Published on April 2, 2020] – Crude and oil product storage is filling up fast in the Middle East’s hub of Fujairah, UAE, because of lack of demand caused by the coronavirus pandemic.

 
The port’s storage capacity of 10mn m³ is scheduled to be fully filled in coming weeks, according to industry sources. “There is virtually no storage available to rent“, a market participant said.

Fujairah Oil Terminal (FOT), which operates a 1.17mn m³ onshore storage facility for crude, oil products and residual fuels, said its tanks have reached capacity.

“I am not sure about other tanks, but our storage terminals are pretty much full at the moment,” FOT commercial director Malek Azizeh told Argus.

Fujairah is a major bunkering hub so lower export demand, especially for 0.5pc sulphur fuel, is backing up product into storage. The economics of sending low-sulphur marine fuel to Singapore are being crimped by low prices there and by the high cost of freight.

“Ninety percent of our storage is [low-sulphur]. The rest of our storage balance is fully booked,” a Fujairah market participant said.

The lack of onshore storage could raise interest in using tankers as floating storage for fuel oil. But the high freight rates mean this will require a wider contango in the market structure.

“The market is in contango at the moment so most are storing rather than selling. There are floaters but the contango is not as steep to justify maybe $250,000/d charter rate,” a bunker trader said.

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