Conflict Disruptions Deepen High-Sulfur Fuel Oil Squeeze
Middle Eastern and Russian supply losses are tightening fuel markets as shipping demand stays strong and Singapore premiums rise.
Key takeaways
- Middle Eastern high-sulfur fuel oil exports are at least 800,000 tons a month below pre-war levels, Vitol said.
- Vitol estimated Ukrainian drone attacks cut Russian refinery supply by about 1 million tons monthly.
- Singapore’s HSFO swap spread hit a record US$95 a tonne on Oct. 7, Argus data showed.
High-sulfur fuel oil supplies are tightening as conflict disrupts Middle Eastern and Russian flows while shipping demand remains robust, OilPrice.com reported. Vitol’s head of Asian operations, Kieran Gallagher, said Middle Eastern exports are running at least 800,000 tons a month below pre-war levels.
Gallagher estimated Ukrainian drone attacks on Russian refineries have reduced supply by about 1 million tons a month. Some Asian refiners have switched from crude to high-sulfur fuel oil as feedstock and snapped up cargoes totaling about 1 million tons for November delivery, he said.
In Singapore, the high-sulfur fuel oil swap spread reached a record US$95 a tonne on Oct. 7, then eased to US$88 the next day, The Business Times reported, citing Argus data. The spread measures the forward price difference between Singapore and Rotterdam. Argus analyst Bob Wigin said its widening points to acute near-term tightness in Singapore.
The spot-market premium for fuel oil used in commercial shipping has reached almost $50 per ton, up from $5.10 in late February, Reuters reported, citing LSEG data. Gallagher said replacing fuel oil with crude as refinery feedstock is key, but shipping risks in the Strait of Hormuz remain a challenge.
This article was produced with the help of AI technology. Based on reporting by the outlets listed above.
