Iranian sanctions Putting Asian Fuel Oil Markets 'At Risk'

According to Clyde Russell, the Asian fuel market could see a defect equivalent to 45 percent of current Singapore inventories every month.

Iranian sanctions are putting the Asian fuel oil market "particularly at risk", according to Reuters market analyst Clyde Russell.

If the West successfully arrest Tehran's ability to move product, combined with increased middle east demand over the summer, he believes it could result in an Asian fuel oil defect equivalent to 45 percent of current Singapore inventories every month.

Yesterday, Ship & Bunker reported that, effective July 1, 2012 a European Union ban on the transportation of Iranian crude oil and products will result in the loss of protection and indemnity (P&I) cover for any ship running on bunker fuel of Iranian origin.

In the personal opinion piece published today, Russell said that, so far, Iranian shipments of fuel oil were "slipping under the radar of Western sanctions" and did not appear to have been disrupted as much as those for crude oil.

But Russell believes that if such moves successfully stop the the movement of tankers, Iranian supply could soon dry up.

He said the timing of that could coincide with, what Barclays believe could be, a peak in Saudi Arabian fuel oil consumption mean The Kingdom could become a net fuel oil importer over the summer.

The result, according to the analyst, could be a loss of almost 1.3 million tonnes a month of fuel oil in Asia, equivalent to about 8.71 million barrels, which in turn represents 45 percent of current Singapore inventories.

Summertime Asian demand could also be up with Russell saying year-on-year fuel oil usage by the island nation was up 205% to 10.39 million barrels in February.

China also has rising fuel oil demand, with China's implied fuel oil demand for March recently being reported as being up 6.5% on the previous month to 721,586 barrels per day (bpd).