DUBAI/SINGAPORE- Storage tanks in the United Arab Emirates' Fujairah bunkering and oil hub in the Middle East have reached full capacity for both crude and oil products, three industry and trading sources told Reuters on Wednesday.
Lockdowns to restrict the spread of the coronavirus have effected 3 billion people worldwide, shredding the demand outlook and leading companies to cut crude refining as storage space dwindles.
Located on the east coast of the UAE at the entrance to the Strait of Hormuz, Fujairah is one of two major ports in the region along with Oman’s Sohar and is a busy refueling point for tankers taking crude on long voyages out of the Gulf.
The Fujairah emirate is keen to boost its status as a global trading hub by increasing its port storage capacity from 10 million cubic meters to 14 million cubic meters by 2020. Traditionally, it focused on tanker fuel and refined oil products but has also expanded into crude storage in recent years.
Oil officials at Fujairah could not be reached for comment.
Tony Quinn, chief executive of Tankbank International, told Reuters that crude and product storage tanks at Fujairah are full, while Singapore’s oil product storage tanks are also nearing capacity.
"If you go back to the beginning of the year, everyone had built up their stores of low-sulphur fuels for 2020, but then the market slowed right down with a lot of stocks still in tanks," he said.
"Most of the terminals in Singapore and the UAE had really filled up after Christmas on the back of IMO-2020 (marine fuel) stock builds and they haven’t really emptied since.”
Oil traders have been chartering supertankers with options to store oil at sea as global stocks mount and to take advantage of a widening contango market structure, when cargoes for short-term delivery are cheaper than those for later delivery.
In such instances, oil majors and trading houses charter ships to store oil they produce or buy cheaply from the market, betting they can resell at a profit when prices recover.
Abu Dhabi's national oil company ADNOC has storage and loading facilities at Fujairah and is building new oil storage facility under the area's mountains, with completion due this year.
(Reporting by Rania El Gamal and Roslan Khasawneh Additional reporting by Dahlia Nehme Editing by Louise Heavens and David Goodman) ((email@example.com; +971 562 160 434; Reuters Messaging: firstname.lastname@example.org ; Twitter: @RaniaElGamal10))