The Middle East's biggest ship refuelling station, at the port of Fujairah in the UAE, may soon have to start charging higher costs as the West's sanctions against Iran start to restrict supplies of fuel oil.
Fuel oil is a residue that is removed during the refining of crude oil, and is used as fuel for ships and power plants.
Fujairah depends on Iran to supply nearly a third of the one million metric tonnes of fuel that it buy and sells each month, but as the sanctions curb Iran's export volumes, the majority of the fuel will be shipped to the port of Singapore, as the preferred customer, because it buys four times as much fuel as Fujairah.
Barclays confirmed that, "with the pressure from sanctions increasing over the past two months, more Iranian fuel oil is heading to Singapore, thereby reducing supplies to Fujairah."
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To increase the pressure on the UAE refuelling station Iranian fuel oil has become much more popular due to recent International Maritime Organisation standards which force ships to keep their sulphur emission to less than 3.5%. Iranian fuel oil is naturally very low in sulphur.
Traders at Fujairah may have to look for alternative sources of low-sulphur fuel which they can then blend with higher sulphur fuel in order to make up for the loss of supply from Iran.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com More