The market is marked by a shortage of ship fuel and power plant fuel, which will increase during the third quarter, as refiners are increasingly pressured by the wars that have disrupted both crude processing and tanker traffic, prioritizing the production of diesel and other products, according to Reuters.
While crude oil has not seen major price increases in recent months, refined product prices have soared as attacks have hit refineries in Russia and the Middle East, along with restrictions caused by blocked flows in shipping traffic. China has also reduced refining capacity and exports to avoid emptying stocks.
The reduced supply threatens to further increase costs for shipowners and power generators already facing war-related disruptions. Higher ship fuel costs could also weigh on shipping rates.
Asia will be hit hardest because it relies most on Gulf flows disrupted by the Iran war, with Singapore, the world’s largest fuel oil hub, importing more than half of its demand of nearly 1 million barrels per day, according to import data from Kpler. Consulting firm Rystad has a similar outlook.
The deficit is expected to reach 218,000 barrels per day in the third quarter, consultancy Energy Aspects forecast, the first deficit it has forecast since the third quarter of 2025, when it was just 6,000 barrels per day.
Fuel oil joins gasoline, diesel and jet fuel as among the refined products struggling to keep up with demand. U.S. diesel prices hit record highs last week as renewed U.S.-Iranian hostilities and Ukrainian attacks on Russian refineries increased supply disruptions.
Refineries shifting to produce some of these other products to make higher profits has meant that fuel oil has been hit harder.
Nigeria’s 650,000-barrel-per-day Dangote Refinery, for example, has increased exports of diesel, gasoline and jet fuel, while its fuel oil exports have fallen, according to Kpler.
Dangote and other refiners can use fuel oil as a feedstock in secondary refining units to produce other fuels.
Prices have surged 76% in the major oil hub of Singapore. Fuel oil stockpiles and prices are already reflecting the pressure.
Stocks are about 30% below three-year seasonal averages in the major shipping hubs of Singapore, Amsterdam-Rotterdam-Antwerp and Fujairah, data compiled by Reuters shows.