A shortage of fuel oil used by ships and power plants is expected in the third quarter as refiners, facing war-related disruptions, prioritize diesel and other higher-value products.
While crude oil prices have avoided major spikes, refined fuel prices have surged as refinery strikes and disruptions in Russia and the Middle East, together with restrictions on tanker traffic, tighten supplies. China has also reduced refining activity and exports to preserve domestic stocks.
A tighter market might lead to increased costs for shipowners and power generators, and higher bunker prices could also cause shipping rates to rise.
Asia is likely to suffer the worst effects since the region depends on fuel oil supplies from the Gulf, which have been disrupted by the Iran conflict. As Kpler states, Singapore, the world’s biggest bunker hub, imports more than half of the nearly 1 million barrels per day of fuel oil it needs.
Energy Aspects is forecasting a 218,000-barrel-per-day deficit in fuel oil in the third quarter, the first anticipated shortfall since the third quarter of 2025.
Valerie Panopio of Rystad said that because of the prolonged supply disruption in the Middle East the fuel oil supply is expected to remain critically tight in the third quarter.
Price Up 76% in Singapore
In major hubs such as Singapore, Amsterdam-Rotterdam-Antwerp, and Fujairah, fuel oil stocks are currently about 30 percent below the three-year seasonal averages.
Fuel demand is also increasing due to longer shipping routes that go around the Bab el-Mandeb and the Red Sea.
According to ZeroNorth, very low sulfur fuel oil, which is the principal type of marine bunker fuel, has increased by 76% since the outbreak of the Iran war and was worth nearly $825 per metric ton, or around $130 per barrel, in Singapore as of 1 September. Brent crude oil has also risen by 40% over the same period.
Russia and Middle East Hit Supplies
According to Kpler, Ukraine’s drone strikes on Russian refineries have caused a sharp drop in fuel oil exports, which fell to a record low of 591,000 barrels per day in August, as compared with an average of more than 860,000 bpd in 2025.
Middle East exports of fuel oil also fell by 45% year-on-year, averaging 447,000 barrels per day from March to August.
The Al-Zour refinery in Kuwait, which is a major exporter of fuel oil, has exported only a single cargo of 26,000 bpd since March, whereas the volume was about 191,000 bpd in January and February.
