Fujairah’s new VLCC jetty, oil benchmarks & more

The Oilholic finds himself roughly 3,500 miles south east of London, in Fujairah, United Arab Emirates, for a speaking engagement at the Gulf Intelligence Energy Markets Forum 2016. 

However, before proceedings began at the event, the Emirate’s administration took the occasion to launch its first Very Large Crude Carrier (VLCC) jetty, built at a cost of AED 650 million (£137m, $177m), with the construction of a second jetty already underway. In sync with the launch, VLCC Kelly, part of the Abu Dhabi National Oil Company fleet, moored at the jetty (see above left).

The move, a part of Fujairah’s drive to catch-up with Singapore as a major oil storage hub on the so-called South-South energy shipping corridor, was accompanied by global price aggregator Platts announcing it would publish independent, outright price assessments for a range of oil products for the Middle East market on a FOB [Free-On-Board] Fujairah basis starting on 3 October, 2016.

The Port, for its part, will also publish weekly inventory data to improve transparency. With the likes of Vitol and Gulf Petrochem bolstering their presence in Fujairah, private tank storage capacity is tipped to exceed 14 million cubic metres by 2020, from an expected 9 million cubic metres by the end of 2016. That’s definitely something to mull over in terms of the global oil storage stakes, considering the fact that less than two decades ago all people saw when it came to Fujairah was a bunkering hub.

The events preceding provided the perfect setting and plenty of talking points for the EMF itself, which is growing bigger with each passing year; a testament to the Gulf Intelligence team. Yours truly, moderated two panels on key subjects – including the crucial need for Middle Eastern benchmarks and strategies for securing oil and gas sector finance amid oversupply.

Of course in the current climate, market discourse would not be complete without touching on the direction of the oil price. Readers of this blog are familiar with the Oilholic’s belief that the oil price is likely to be stuck in the $40-50 per barrel range, and would be no higher than that come the end of the year.

Given the current set of circumstances, we could in fact be stuck either side of $50 for much of 2017; a point one made forcefully at a lively EMF debate. 

Constantly lurking in background is possible cooperation between OPEC and Russia over the issue of freezing and/or cutting oil production. According to Iraq's governor to OPEC Falah Alamri, a featured speaker at the EMF, circumstances were right for oil producers to seal an output freeze deal.

"There was no deal in earlier attempts [in February and April in Doha] because the circumstances weren't right for producers to strike a deal. This time things are different because circumstances are little bit better and would help in reaching a deal," he told the audience. 

However, it’s not reaching a deal that would be the problem. The real problem will arise when the powers that be sit down and try to work out how to implement the deal! Overall, some lively conversations were held about the market direction with a broad spectrum of views. It was great being back here, but that’s all from the UAE folks! Keep reading, keep it crude! 

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© Gaurav Sharma 2016. Photo 1: VLCC Kelly moored at the Port of Fujairah, UAE. © Gaurav Sharma, September 2016. Photo 2: Gaurav Sharma (left) with Matt Stanley, Fuel Oil Broker at Freight Investor Services at the Energy Markets Forum 2016 © Gulf Intelligence.