Emirati Oil Company Hoarding Jet Fuel

Emirates National Oil Company has begun storing jet fuel on tankers ahead of US sanctions against Iran to ensure planes arriving and leaving Dubai have enough fuel, industry sources said.

ENOC has chartered two Suezmax tankers for a period of 30 to 60 days, the sources said, with an option for storing oil products, Oil Price reported.

The move could be taken as business as usual, were it not for the fact that the spread between current and front-month jet fuel swap prices is at present in a contango. This means that the front-month price is higher than the current one, so ENOC will have to pay more for storing the fuel than it will make from it.

ENOC buys condensate from Iran—the superlight crude that jet fuel is made from—and processes it at a 140,000-barrel per day facility. About 20% from the facility’s output are jet fuel.

Now the Emirati company will have to find alternate sources of condensate and it is interesting why it had not done so earlier in light of the fact that Washington’s pullout from the Iran nuclear deal was announced as early as May.

It could be that, like other Iranian oil buyers, ENOC was hoping for a sanction waiver or a change in the circumstances to continue importing Iranian superlight crude. The last shipment of Iranian condensate to the processing facility in the port city of Jebel Ali arrived last month, Reuters shipping data show.

The news is the latest in a string of reports about how major Iranian oil clients are preparing for the November 4 deadline after which the sanctions will snap back. India is switching to paying for Iranian crude in rupees to avoid punitive actions from the US Treasury Department, for example, while Japanese refiners have suspended all Iranian oil purchases ahead of the sanction deadline.