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Iran sanctions create two-tiered Middle East bunker market: sources

A two-tiered price market has emerged in the Fujairah delivered bunker arena as suppliers start to distinguish product as sanctioned or not, traders said this week.

“Yes, there is now a two-tiered market in Fujairah and the difference between Iranian origin and non-Iranian origin delivered [380 CST] bunker fuel can be as much as $10/mt,” a trader said Friday.

“That’s why we would rather focus only on our premium customers who are willing to pay up for a brand name and a reliable supplier,” he said.

Iran exports anywhere between 1 million mt to 1.4 million mt per month of fuel oil. A fair share of this goes to meet bunker demand in the Middle East, while the bulk of the rest finds its way eastward.

Though a two-tiered market has emerged at Fujairah, it is not easy to distinguish sanctioned from non-sanctioned barrels as some of the Iranian barrels have been “cleansed”, either by being blended at sea with non-sanctioned supplies or by re-exporting from a different port, traders said.

“Iranian barrels were being taken to Iraq’s Khor Al Zubair port and re-exported,” a trader said. “These are barrels from Bandar Mahshahr … fuel oil with 280 CST viscosity and a sulfur content of 3.2-3.3%.”

Overall product availability in Fujairah is tight due to relatively less sanctioned Iranian fuel oil coming into the bunker pool there, traders said.

“So there are some people who are struggling to blend [380 CST] bunker as they have to now look for other avenues,” he added.

“Even though sanctioned oil is still coming to Fujairah, the volumes are not as much.” a trader said, adding that big prominent shipments that used to appear have not emerged except for smaller sized parcels.

Offers for ex-wharf Fujairah 380 CST bunker for December supply were heard at a premium in the $12-$15/mt range to the Mean of Platts Arab Gulf 180 CST high sulfur fuel oil assessments, while trades were so far heard concluded at premiums of $10-$12/mt, said traders. This is slightly higher from contracts that were inked for November supply at around $10/mt premium to MOPAG 180 CST HSFO, said traders.

S&P Global Platts assessed Fujairah ex-wharf 380 CST bunker premium to MOPAG 180 HSFO at $11.03/mt Thursday, unchanged from the day before. The premium has averaged $10.35/mt so far this month, up from $9.25/mt in October, Platts data showed.

Source: Platts

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