SINGAPORE, Mar 6: Asian fuel oil traders are struggling to secure replacement cargoes after the ongoing Iran conflict disrupted shipments from key Middle Eastern suppliers passing through the Strait of Hormuz.
The supply disruption has significantly tightened the availability of fuel oil used as bunker fuel for ships. As a result, prices at major refuelling hubs such as Singapore are expected to rise further in the coming weeks, increasing operational costs for vessel owners and shipping companies. Higher refuelling expenses are likely to translate into increased transportation costs for goods globally.
Market expectations of tighter supply have already sparked a rally in fuel oil prices, particularly for high-sulphur fuel oil that is largely sourced from the Middle East.
Shipping Disruptions Hit Supply
Data from market intelligence firm Kpler shows that fuel oil exports moving through the Strait of Hormuz toward Asia normally average about 1.2 million metric tonnes per month, equivalent to around 246,000 barrels per day. Nearly 70% of those volumes are shipped to Southeast Asia.
Overall fuel oil shipments passing through the key waterway typically total about 3.7 million tonnes each month. However, vessel-tracking data indicates tanker traffic in the strait has dropped sharply, with transits falling by nearly 90% compared with last week.
Analysts say heavy dependence on this single maritime corridor has made the global fuel oil market highly vulnerable to disruptions.
Prices Surge at Key Bunkering Hubs
The supply crunch has pushed bunker fuel prices sharply higher in Singapore, the world’s largest ship refuelling centre. Prices for high-sulphur bunker fuel delivered there have climbed more than 40% since the conflict began, while low-sulphur fuel oil prices have risen by over 30%.
The surge reflects concerns that shipments from the Gulf region—normally a major supplier of marine fuel—may remain constrained if tensions continue.
Limited Alternative Supplies
Traders say replacement cargoes may come from Western producers such as the United States and Mexico, but high tanker freight rates are making such trades financially challenging.
Another potential source is Venezuela, although most of its shipments have remained within Western markets so far this year. Russian fuel oil could also fill part of the gap, but sanctions linked to the Ukraine war make those cargoes sensitive for many buyers.
Iranian fuel oil exports, which are already under sanctions, have also stalled due to the ongoing conflict, further tightening supply.
Stockpiles May Decline Soon
Although Singapore currently holds relatively large fuel inventories both onshore and in floating storage, traders expect those stockpiles to shrink quickly if new supplies fail to arrive.
The broader energy market across Asia is already under pressure, as disruptions in the Strait of Hormuz through which roughly one fifth of global oil supplies normally pass continue to affect crude and refined product flows.
Analysts warn that if the disruption persists, tightening fuel availability could push shipping and logistics costs higher across global trade routes.