LONDON, (Reuters) – Saudi Arabia has steeply raised the amount of its jet fuel earmarked for the United States military, which is expanding its presence in the Gulf, Middle East trading sources said.
They said state oil company Saudi Aramco may have put aside upwards of a million tonnes of the aviation fuel for possible use by the U.S. military this year, compared with around 200,000 tonnes in 2006.
“I believe that Saudi Arabia was warned in advance of the increased U.S. military activity starting early 2007 and may have allocated 1.0 million to 1.2 million tonnes of jet fuel for possible use by the U.S. military during 2007,” one source said.
The Pentagon dispatched a second aircraft carrier strike group to the Gulf last month.
The Defense Energy Support Center (DESC), which oversees the Pentagon’s fuel purchases, said an increased presence would entail more fuel demand.
“We are expecting to send another 20,000-25,000 troopers to the Middle East in the near term, so there should be a significant increase in fuel demand,” said Patrick Jones, a DESC spokesman in Virginia.
He said the extra supply of jet fuel, as well as other oil products, would come from existing contracts with Middle East suppliers.
A spokesman for the U.S. Navy’s Fifth Fleet in Bahrain said all naval aircraft used JP-5, a high flash point aviation fuel.
While refineries typically produce standard jet A-1 for civilian aircraft, this can easily be upgraded to JP-5.
“You can’t find too much spare jet fuel supplies in the Gulf because a lot of volumes have been farmed up for them (the Pentagon) from Aramco, Adnoc and Bapco,” said a Middle East trading expert, also referring to refiners in Abu Dhabi and
“They are bound to produce what they call the JP-5 and the quantity of normal jet will be affected.”
Saudi Aramco acknowledged that its jet fuel supplies to export markets had been cut, but said this was due to higher demand within Saudi Arabia.
“The cutback in jet fuel exports, which our customers have been made aware of, is the result of higher domestic distillate demand,” a Saudi Aramco spokesmand said.
Saudi oil industry sources said last November that Aramco planned to cut its jet and diesel exports by a half this year.
At that time they said the cuts were due to heavy planned refinery maintenance in Saudi Arabia, as well as increased demand from regional consumers, including rising jet fuel demand from airports across the Gulf.
An oil consultant familiar with Gulf supply patterns said Aramco’s jet supply to its term customers were being cut to 2.3 million tonnes this year versus 4.4 million tonnes in 2006.
He said refinery maintenance and rising domestic jet demand would account for less than half of the export cut, with most of the balance set aside for potential U.S. military use.
Regional traders said the expected hike in supply to U.S. forces would be in addition to military jet fuel volumes from regular suppliers to the U.S. like Abu Dhabi’s Adnoc, Bahrain’s Bapco, Kuwait Petroleum Corp. and Qatar Petroleum.
Jet traders said the Saudi move to divert jet fuel exports was likely to cut supply surpluses in Asia.
“Asia is now flooded with jet supplies,” said a Middle East distillates trader.
“Supplies that would have come to the East were cut; less supplies are coming as a result,” another trader said.