Refiners worldwide are tightening fuel oil supplies as they shift production toward higher‑margin diesel, gasoline and jet fuel. The move comes amid ongoing wars that have disrupted crude processing and tanker traffic, leaving ship owners and power generators facing a looming shortage.
Why fuel oil is in short supply
Consultancy Energy Aspects forecasts a deficit of 218,000 barrels per day of fuel oil for the third quarter, the first shortfall of this magnitude since the same period in 2025, when the gap was a modest 6,000 bpd. The shortfall reflects a “critically tight” market, according to Rystad analyst Valerie Panopio, who cites prolonged supply disruptions in the Middle East.
Crude oil prices have remained relatively stable, but refined product prices have surged as strikes damage refineries in Russia and the Middle East and as curbs on ship traffic choke flows. China has also reduced refining capacity and exports to preserve its own stockpiles.
Regional impact
Asia is expected to feel the hardest impact because it relies heavily on Gulf flows that have been disrupted by the Iran war. Singapore, the world’s largest bunker hub, imports more than half of its nearly one‑million‑barrel‑per‑day demand, according to Kpler data. Rystad’s outlook aligns with this assessment.
Fuel oil inventories in key hubs are already well below seasonal averages—about 30% lower in Singapore, the Amsterdam‑Rotterdam‑Antwerp hub, and Fujairah. Prices for very low‑sulphur fuel oil have jumped 76% since the Iran war began, reaching just under $825 per metric ton (about $130 per barrel) in Singapore as of September 1, according to ZeroNorth.
Refiners’ profit calculations
Refineries are opting to produce higher‑value products to capture fatter margins. Nigeria’s 650,000‑barrel‑per‑day Dangote refinery, for example, has increased diesel, gasoline and jet fuel exports while cutting fuel oil shipments. Many refineries also use fuel oil as feedstock for secondary units that produce other fuels, a practice that further tightens the balance.
Energy Aspects analyst Royston Huan notes that record‑low gasoline and diesel inventories will encourage refineries worldwide to run secondary units at higher rates, consuming more fuel oil and tightening supplies even further.
Geopolitical factors
Ukrainian drone attacks have reduced Russia’s refinery output, with fuel oil exports in August falling to a record low of 591,000 barrels per day, down from an average of over 860,000 bpd in 2025. In the Middle East, fuel oil exports dropped 45% year‑on‑year, averaging 447,000 barrels per day from March to August. Outages at Kuwait’s Al‑Zour refinery—a major fuel oil exporter—have limited shipments to a single 26,000‑bpd cargo since March.
What this means for shippers and power generators
Higher bunker fuel costs are likely to feed into shipping rates, adding expense for global trade routes. Power generators that rely on fuel oil for electricity production will also face higher input costs, potentially passing those costs onto consumers.
Stakeholders are watching the market closely. As refiners continue to prioritize diesel, gasoline and jet fuel, the fuel oil shortage underscores the broader ripple effects of geopolitical conflict on energy markets and the everyday costs of moving goods and generating power.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
