Fuel Oil Supply Crisis Looms as Refiners Prioritize Other Products
A fuel oil supply crisis is looming on the horizon as refiners prioritize producing other products due to higher profits. According to Reuters, wars disrupting crude processing and tanker traffic have squeezed fuel oil supplies. While crude oil prices remain relatively stable, refined product prices have surged due to refinery damage in Russia and the Middle East, as well as shipping curbs.
China has reduced refining capacity and exports to conserve stocks, further tightening supply. This shortage threatens to raise costs for shipowners and power generators already facing war-related disruptions. Higher bunker fuel costs could feed into shipping rates.
Asia is expected to be hardest hit due to its reliance on Gulf flows disrupted by the Iran war. Singapore, the world's largest bunker hub, imports more than half of its nearly 1 million barrels per day demand, according to Kpler data. Rystad shares a similar outlook.