In a rare move, Saudi Arabia imported fuel oil from Kuwait for the first time in over two years in July to meet peak summer power demand, as discounted supplies from Russia decreased. The imports of Kuwaiti high sulphur fuel oil (HSFO) exceeded 180,000 metric tons, roughly translating to about 37,000 barrels per day, marking the first purchase from Kuwait since May 2022.
This shift in trade dynamics is helping to maintain Kuwaiti supply in the Middle East, which is supporting benchmark prices in Singapore, even as overall Middle Eastern exports decline. The trend is expected to continue into August, with Aramco Trading winning a tender for an additional 130,000 tons of very low sulphur fuel oil (VLSFO) from Kuwait’s Al Zour refinery. This cargo is scheduled to load on August 11-12 and was traded at a discount of about $8 to Singapore VLSFO quotes on a free-on-board Kuwait basis.
Despite the new imports from Kuwait, Russian supplies still dominate Saudi Arabia’s fuel oil imports, accounting for approximately 441,000 tons in July, which makes up about 30% of total volumes. However, this is a decline from nearly 750,000 tons in the same month last year. In June 2023, Saudi Arabia imported record volumes of discounted Russian fuel oil to meet summer demand while exporting its own production at higher prices.
Analysts have noted that competition from China and India for Russian HSFO has prompted Saudi Arabia to seek alternative suppliers like Kuwait. Additionally, refinery maintenance at the SASREF refinery from April to June may have limited Saudi Arabia’s ability to boost fuel oil stocks ahead of the summer season.
Kuwait has surplus HSFO available for export since its power plants have transitioned to burning low sulphur fuel oil (LSFO) since last year.