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Singapore: Iran, a regular exporter of fuel oil to Asia, will halt shipments of the heavy fuel from August as it builds domestic stocks ahead of winter, and due to a heavy fourth-quarter maintenance season, industry sources said on Thursday.
Iran has been shipping out about 1.2 million tonnes of the residual fuel monthly since April. Rising domestic consumption and a lack of gas alternatives had also forced it to reduce exports over the past two winters.
"This is true, we will be concentrating on building up stocks for use at our power stations," a source familiar with the fuel oil export programme said.
Iran's decision came on the heels of Saudi Arabia's move to not resume spot fuel oil exports after its peak summer demand season, due to persistently strong requirements from domestic power plants and new secondary refining units.
The moves by the two biggest fuel oil exporters in the Middle East will worsen the current tight supply in Asia, helping to boost crack levels to around $13-$14 a barrel below Dubai crude, a seven-month high.
"I'm not surprised if we see the fuel oil cracks flip back into a premium at some point over the next two, maybe three months," a Singapore-based senior fuel oil trader said.
Power usage
Robust economic growth in Middle East oil-producing nations has spurred industrial demand for utility fuels, as power usage across the Gulf Cooperation Council (GCC) grows at an annual rate of around 8 per cent.
Gas projects have also failed to keep pace with demand for power generation. Apart from Qatar, all Gulf states are short of gas.
"Iran relies on gas supplies for its power generation especially during peak demand periods, and they are stockpiling now so that that they won't get into the situation they did last year," a Singapore-based trader said.
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