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Oil major Royal Dutch Shell Plc is reported to be shipping approximately 1 million barrels of fuel oil from Singapore to Fujairah in a move which is expected to ease supply concerns at the Middle East's main refuelling hub.

The time chartered vessel is said to be already on its way to the world's third largest bunkering port, and is expected to arrive at its destination in early July.

The rare arbitrage move by Shell follows a period of tightening supplies in Fujairah following the decrease in exports from Iran and Iraq. The port normally receives between 200,000 tonnes and 300,000 tonnes of 380-centistoke (cst) fuel oil per month from Iran, but exports have been reduced in recent weeks as summer approaches and domestic demand for the fuel increases.

Fuel oil export volumes from Iran are traditionally lower in the build up to both the summer and winter seasons as the country focuses on meeting domestic demand for power generation.

In previous winters, for example, this has resulted in exports to Fujairah being slashed by up to 60 percent. Fujairah is one of the leading bunker ports in the world with estimated volumes of between 13 and 15 million tonnes per year.

As a consequence of the reduction in fuel oil shipments and tightening supplies, bunker premiums - the margin traders make on selling marine fuel after wholesale purchases - have more than doubled since the end of May.

Middle East bunker premiums were pegged at around $15 per tonne for the week ended June 19, versus about $7 per tonne in May, according to traders.

In comparison, bunker premiums in Singapore are hovering at around $4 per tonne, up from $2-$3 a tonne last week.

News of the incoming cargo is expected to ease the short term supply concerns of UAE-based bunker firms, but industry players will now be looking to see how many more cargoes they can expect to arrive into Fujairah over the coming weeks.

Market sources have said that Shell is expected to send an additional fuel oil cargo from Fujairah to Singapore. The oil major is reported to be in the process of trying to secure a ship.