UAE and Saudi refineries in demand as conflict-hit Iraq and Yemen suffer outages

War-related outages at important refineries in Iraq and Yemen are helping to underpin regional demand for petrol and other products from two recently expanded plants in the UAE and Saudi Arabia.

In Yemen, fighting has led to severe shortages of transport fuel. Television reports from various agencies over the weekend showed long queues at petrol stations in Yemeni cities, where prices have quadrupled in recent months as fighting has intensified.

On Thursday, the government-owned Aden Refinery Company, which operates a 130,000 barrels per day plant across the harbour in Little Aden, declared force majeure on its oil imports and exports, Reuters reported.

Fighting in Yemen is scaring off shippers, with at least four oil and natural gas tankers that were headed to Yemen being diverted recently, the news agency said.

In Iraq, the country’s largest refinery at Baiji, about 200 kilometres to the north-west of Baghdad, came under renewed attack this week from ISIL militants.

The refinery, which supplies the bulk of petrol and other refined products to the domestic market, has been the scene of intense intermittent fighting for the past year between government forces and extremists, who are trying to control Anbar province, where the plant is located.

The 300,000 bpd plant at Baiji has become a key strategic battleground because of its importance to the domestic market and as the refiner of crude from the nearby Kirkuk oilfield, which also has been the scene of battles for control, said Jaafar Altaie, the managing director at Manaar Energy Consulting in Dubai.

The chronic outages at Baiji and elsewhere in the region have not been covered by capacity increases, according to the International Energy Agency (IEA), the Paris-based energy think tank.

The additional regional production is mainly coming from the UAE and Saudi Arabia, with a total of more than 800,000 bpd being added.

The Abu Dhabi National Oil Company (Adnoc) last month began to divert the supply of its main crude grade, Murban, from Asian customers to its expanded plant at Ruwais, which lies about 180km west of the capital. The addition at Ruwais is estimated to be 417,000 bpd.

Saudi domestic refinery runs are expected to have increased in March as production ramped up at a 400,000 bpd plant at Yanbu, the Red Sea port city.

The plant is a joint venture with the China National Petroleum Company.

The IEA said that Saudi demand for refined products is also rising as domestic power plants begin to burn more crude with peak summer demand approaching.