Saudi holds over supply of gas in ships off Jeddah

OVER SUPPLY: 1.5 million barrels of gas are being held in ships in Jeddah port due an oversupply. (Getty Images)

Saudi Arabia, the world's top oil exporter, is holding up to 1.5 million barrels of gasoline on ships just off the Red Sea Coast port of Jeddah, industry sources said on Monday.

The ships have been waiting to discharge for more than two days but, because of brimming inventories on land, they have not been able to proceed, shipping sources said.

"The ships have been sitting out there two...three days, they can't discharge because the tanks are at capacity," a Middle East based shipping source said.

"It's just a sign of the times we already have nearly 30 million barrels of distillates floating in Europe, only a matter of time that we start seeing it out here (Middle East)."

Saudi Arabia typically imports between 60,000 to 70,000 bpd of gasoline monthly, but had boosted purchases up to 80,000 bpd in April and May.

The OPEC member raised imports due to the unplanned shutdown of a 44,000 bpd hydrocracking unit at its largest refinery in Ras Tanura and scheduled maintenance at its 122,000 bpd Riyadh refinery, traders had said.

"They took advantage of weak global prices to build up their inventories, but it looks like domestic consumption has tapered off," a Singapore based gasoline trader said.

"Either way for large gasoline guzzlers like Saudi Arabia and Iran, having high inventories...purchased at cheap prices is good for the country overall..."

But most traders and analysts said tapering demand for the highly subsidised motor fuel in the kingdom could be yet another signal of size of the hit global demand has taken by the worldwide financial slowdown, traders said.

"Places like the Middle East are supposed to be regions where there is still growth although much slower, so for us it is a concern when we see signs that demand could be coming off," an Asian based gasoline trader said.

World oil demand this year will contract by 2.56 million bpd, the International Energy Agency (IEA) said in a monthly report issued last week.

The IEA, which advises 28 industrialised countries said previously demand would fall by 2.4 million bpd this year.

Falling demand has led to stocks rising and the IEA said inventories in developed countries at the end of March equalled 62.4 days of forward demand. This is the highest since 1993 the IEA said.

A rise in the amount of crude oil and refined products stored in tankers, estimated to be anything between 100-130 million barrels, adds two to three days to total forward demand cover, the IEA said.

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