Fuel Oil Shortage Expected as Refiners Shift Focus Amid Conflicts

A significant shortage of fuel oil, essential for ships and power plants, is projected for the third quarter as refiners prioritize the production of diesel and other products due to ongoing conflicts affecting crude processing and tanker traffic.

Despite stable crude oil prices recently, refined product prices have surged, driven by strikes at refineries in Russia and the Middle East, along with restrictions on shipping. China has also reduced its refining capacity and exports to manage stock levels. The anticipated shortfall is expected to reach 218,000 barrels per day, marking the first deficit since the third quarter of 2025.

Asia is likely to be the most affected region, heavily reliant on Gulf oil flows disrupted by the Iran conflict. Singapore, as the largest bunker hub, imports a significant portion of its fuel oil needs. The price of very low sulphur fuel oil has risen sharply, reflecting the tightening supply, while refinery outages in the Middle East have further exacerbated the situation.