Singapore-based Concord Energy and China's Sinopec will start to build oil storage in the UAE port of Fujairah within two months, a source at Concord Energy said on Wednesday.

Traders are rushing to secure oil storage outside the Strait of Hormuz as tensions rise over Iran's nuclear programme.

'Construction is set to start within the next two months,' the source said. 'There's a construction period of 21 months, so it is expected to be completed in early 2014,' he added.

The total capacity of the oil storage will be 1.125 million cubic metres and around half of this will be leased to Sinopec.

A statement on Sinopec's website said the total investment in the project was estimated to be approximately $303.8 million. 'We chose Fujairah for its strategic location,' the source said.

'Energy traders have struggled in these markets before and there's been a definite push in Concord to move towards acquiring assets and this project is a part of that,' he stated.

Asia's strong oil and oil products demand have prompted many oil producers and trading houses such as Litasco, Noble Group and Azeri Socar to secure oil storage rights in the Gulf region.

But experts say particularly after Iranian threats to block the Strait of Hormuz, the world's largest oil and gas shipping route, capturing oil storage capacity outside the straits has been among the top priorities of traders.

This has propelled bunkering volumes higher in Fujairah, making the port one of the top three bunkering hubs in the world along with Singapore and Rotterdam

China Petroleum & Chemical Corp, also known as Sinopec Corp is Asia's biggest refiner.-Reuters