Singapore: Exports of Iranian marine fuel oil have unexpectedly been halted for two weeks and will not resume for at least a month, a source at the National Iranian Oil Company (NIOC) said.

Trade sources said Iran could be stocking up on fuel oil for power generation in case of a shortfall in gas supplies. Growth in domestic demand for gas has outpaced local output, exacerbated by Western sanctions limiting Iran’s ability to ramp up production from aging fields.

The halting in exports of Iran’s cracked 380-centistoke — which makes up nearly a fifth of monthly sales at the bunkering hub of Fujairah in the United Arab Emirates — coincides with limited supplies into Asia, as high freight rates have hampered flows from the West and summer demand for the heavy distillate cut exports from the Middle East.

“NIOC International and National Iranian Oil Products Distribution Company (NIOPDC) stopped exports about two weeks ago,” said the company source, who has direct knowledge of the move.

It was not immediately clear when exports would resume.

“Nobody knows how long it would take but it is not less than one month,” said the source, who asked not to be identified because of company policy on speaking to the media.

Some traders estimated the halt in exports could last for up to three months.

“They [Iranians] are trying to stockpile some fuel oil cargos for October-November because there will normally be big shortages of gas so they have to burn a lot of fuel oil,” said a Gulf-based trader.

According to BP Statistical Review, Iran produced around 161 billion cubic meters (bcm) of gas in 2012, just 3 per cent higher than its consumption of 156 bcm.

Iran exports about 300,000-400,000 tonnes of bunker grade fuel oil a month. Most of this oil is sold from the port of Fujairah, a major bunkering hub in the Middle East with sales of up to 2 million tonnes per month, traders said.

“Bunker premiums are very very strong in Fujairah at the moment,” said a Gulf-based marine fuel trader.

Premiums of marine fuel sold in Fujairah over Singapore quotes shot up to nearly $30 a tonne at end-July, and have averaged around $10 above Singapore quotes — a level not seen since April, traders said.