Key facts
- Middle East EDC production is low due to vessel congestion, high inventories, and weak VCM/PVC prices.
- The UAE's Fujairah is preparing for the potential return of Iranian high-sulphur fuel oil (HSFO) following a US-Iran agreement.
- Market participants in Fujairah express caution regarding the timeline and enforcement of the agreement.
- Iran was previously a significant supplier of HSFO to Fujairah, making up 25% of imports in 2025.
- Supplies of Iranian HSFO were halted due to strained UAE-Iran relations and past attacks.
- Fujairah's VLSFO supply recovery is dependent on Kuwait's al-Zour refinery, which faces domestic demand constraints.
- Fujairah experienced record-high VLSFO premiums in June due to local product shortages.
Middle East EDC production continues to be low, impacted by vessel congestion, high inventories, and weak VCM/PVC prices, despite a recent ceasefire agreement between the US and Iran. In Fujairah, a key bunkering hub, market participants are cautiously anticipating the return of Iranian high-sulphur fuel oil (HSFO) following the easing of regional tensions.
Iran was a significant supplier of HSFO to Fujairah, accounting for 25% of imports or 70,000 barrels per day in 2025, before supplies were cut off due to deteriorating UAE-Iran relations and past attacks. While the agreement offers a potential path to normalizing the trading environment, traders, suppliers, and buyers remain skeptical about the timeline and enforcement.
Some bunker suppliers expressed anxiety, noting that the damage to bilateral relations may hinder a swift return to stable trade. Others believe economic benefits will help overcome difficulties, though they expect prices to be higher post-sanctions. Intense competition for Iranian HSFO is also anticipated from Asian refiners seeking feedstock for their upgrading units.
For very low-sulphur fuel oil (VLSFO), Fujairah's supply recovery is dependent on consistent flows from Kuwait's al-Zour refinery. However, these shipments will be capped until late in the third quarter as domestic power utilities will prioritize burning the fuel for electricity during the summer peak demand period. This, combined with lingering security concerns in the Strait of Hormuz, means prompt VLSFO supply from al-Zour is not expected soon.
Fujairah experienced unprecedented highs in VLSFO premiums against Singapore cargo benchmarks in June due to acute local product shortages. Premiums have since fallen following the arrival of a cargo from Nigeria's Dangote, but remain elevated above normal levels due to sharp falls in the Singapore benchmark price and high freight netbacks.