The Emirate of Fujairah, home to the Middle East’s biggest ship-refuelling centre, will be paying a high cost due to the sanctions imposed on Iran, Barclays’ analysts wrote in a research report.
Miswin Mahesh and Amrita Sen disclosed in their findings that the northern-eastern Emirati city depends on Iran for nearly a third of the 1 million metric tonnes of fuel oil it buys and sells each month.
Barclays said Iranian supplies to Fujairah are likely to decline as the Islamic Republic will seek more lucrative markets like Singapore, which trades four times as much fuel oil as the Gulf port.
Iran is a major exporter of fuel oil, a residue from refining crude which is used as bunker fuel in ship engines and to fire power stations.
The Iranian product’s demand got a major boost when International Maritime Organisation’s (IMO) standards for ship fuel came into effect this year which demands use of low sulphur content.
The bank report added that the premium for fuel oil in Fujairah compared to that in Singapore peaked in February.
“With the pressure from sanctions increasing over the past two months, more Iranian fuel oil is heading to Singapore, thereby reducing supplies to Fujairah,” Barclays said.
The US and European Union have imposed sanctions on Iran’s oil and banking industry to try to bring the country’s nuclear programme to a halt.
The US and its allies insist the nuclear programme is aimed at developing weapons. Tehran denies the charge and says it wants to develop a peaceful civilian nuclear energy programme.
The Barclays report warned that fuel oil prices may skyrocket in the third quarter and further as additional sanctions take effect from 1 July.