Global fuel oil deficit looms as wars squeeze refinery output

A looming shortage of fuel oil is set to push up costs for shipowners and power generators worldwide as wars continue to disrupt refinery operations and tanker routes, according to a Reuters Thomson Reuters Corporation ↘ 5.44% report published Sunday.reuters

Global fuel oil balances are pointing to a deficit in the third quarter of 2026 as refiners, squeezed by conflicts that have damaged crude processing capacity and restricted shipping lanes, prioritize production of diesel, gasoline, and jet fuel over fuel oil.banglanews24+1

Energy consultancy Energy Aspects expects the global fuel oil deficit to reach 218,000 barrels per day in the third quarter — the first shortfall it has forecast since the third quarter of 2025, when the deficit was just 6,000 bpd.firstpost+1

War-Driven Supply Crunch

The shortage traces directly to the disruptions caused by the U.S.-Iran conflict, which began in late February 2026 and has centered on the Strait of Hormuz, through which roughly a quarter of the world's seaborne oil once flowed. Middle Eastern fuel oil exports averaged 447,000 bpd between March and August, down 45 percent from a year earlier, according to data from Kpler. Kuwait's Al-Zour refinery, traditionally a major fuel oil exporter, has seen shipments collapse following outages.congress+2

Russia's fuel oil exports fell to a record-low 591,000 bpd in August as Ukrainian drone attacks disrupted refinery operations, compared with an average of more than 860,000 bpd in 2025, Kpler data showed.banglanews24

"Due to the protracted supply disruption in the Middle East, we expect fuel oil supply to remain critically tight in the third quarter," Rystad Energy analyst Valerie Panopio said.banglanews24

Prices Surge, Inventories Decline

The price of very low sulphur fuel oil, the main fuel used by ships, has jumped 76 percent since the Iran war began to just under $825 a metric tonne in Singapore as of September 1, according to bunker fuel pricing platform ZeroNorth. Brent crude rose about 40 percent over the same period.banglanews24

Fuel oil stocks in Singapore, Amsterdam-Rotterdam-Antwerp, and Fujairah are about 30 percent below their three-year seasonal averages. Longer shipping routes as vessels avoid the Red Sea due to security threats have compounded the pressure by increasing fuel consumption.banglanews24

China's Market Follows Suit

China's domestic fuel oil market mirrored the global trend. According to SunSirs, the average price of 180CST fuel oil in East China rose 2.92 percent last week, reaching 6,612.50 RMB per ton as of September 4. China Marine Fuel quoted low-sulfur 180CST fuel oil at 6,880 RMB per ton in the Dalian region and 6,450 RMB per ton in the Shanghai region. Rising international crude prices and tight spot supplies sustained the upward trend, though SunSirs noted that lackluster downstream shipping demand and weakening freight rates may lead to a period of consolidation.sunsirs

Asia faces the greatest pressure from the shortage, given its heavy reliance on Gulf supplies. Singapore, the world's largest marine-fuel hub, imports more than half of the nearly 1 million barrels a day it requires, according to Kpler.banglanews24