Shipping Fuel Shortage Looms as Refiners Favor Diesel Over Ships

A looming shipping fuel shortage is unfolding due to refiners prioritizing diesel production over fuel oil, which is used for ships and some power plants. According to Reuters, the supply of fuel oil for the shipping industry is getting squeezed by the war-driven tightness in diesel fuel. Asia is set to suffer the most severe blow from this shortage, with a 218,000 barrels daily shortfall predicted for the current quarter.

This would be the first quarter since 2025 that the shipping industry faces a fuel oil shortage. In 2025, the shortage was much smaller at just 6,000 barrels daily. Rystad Energy analyst stated 'Due to the protracted supply disruption in the Middle East, we expect fuel oil supply to remain critically tight in the third quarter.'

The energy crisis unfolding globally has led to record-high refinery margins across the world. The first aspect of this crisis is the tighter supply of crude from the Middle East. Additionally, there has been significant refinery damage in the region, with as much as a fifth of that refining capacity knocked out by hostilities.