Ship-Fuel Prices Surge as Refinery Disruptions Cut Supply
Singapore’s main bunker fuel has risen 76% since the Iran war began, with analysts forecasting a global third-quarter deficit.
A shortage of fuel oil used by ships and power plants is emerging as refinery disruptions and constrained tanker traffic reshape the global products market. The price of very-low-sulphur fuel oil in Singapore, the main grade used for compliant marine bunkers, rose 76% from the start of the Iran war to just under $825 a metric ton, or about $130 a barrel, by September 1.
That increase is substantially larger than Brent crude’s roughly 40% rise over the same period. The divergence shows that the shock is not only about the price of raw oil. Refineries are prioritising diesel, gasoline and jet fuel because those products offer stronger margins, leaving less residual fuel available for ships and power generation.
Energy Aspects forecasts a third-quarter fuel-oil deficit of 218,000 barrels a day, compared with a marginal 6,000-barrel deficit in the same quarter of 2025. Rystad Energy also expects supply to remain critically tight. These are consultancy estimates, not measured final balances, but inventory and trade data support the direction of travel.
Stocks in Singapore, Amsterdam-Rotterdam-Antwerp and Fujairah are about 30% below their three-year seasonal averages. Asia is particularly exposed because it relies heavily on Gulf supplies. Singapore imports more than half of the nearly 1 million barrels a day consumed by its bunker market, making disruptions in the Middle East immediately relevant to the world’s largest refuelling hub.
Middle Eastern fuel-oil exports averaged 447,000 barrels a day from March through August, down 45% from a year earlier. Kuwait’s Al-Zour refinery, normally a major exporter, shipped only one cargo at a 26,000-barrel-a-day rate after March, compared with about 191,000 barrels a day in January and February. Russian exports fell to a record-low 591,000 barrels a day in August, from an average above 860,000 in 2025, after attacks affected refining capacity.
Shipping routes add demand at the same time supply is shrinking. Vessels travelling around the Red Sea and Bab el-Mandeb to avoid security threats consume more fuel and tie up ships for longer. The combination turns a refinery problem into a freight problem: shipowners pay more per ton and burn more tons per journey.
Not every carrier can immediately pass the cost through. Container lines may use bunker-adjustment clauses, but timing and competition determine recovery. Bulk carriers and tankers negotiate voyage economics directly. Smaller operators with weak hedging or old, inefficient fleets are more exposed. Power utilities that burn fuel oil, especially in island and emerging markets, compete for the same constrained barrels.
There are substitution limits. Ships designed for conventional bunkers cannot instantly switch to LNG or methanol, and scrubber-equipped vessels depend on the availability and economics of high-sulphur fuel. Refiners can alter output, but doing so may sacrifice higher margins on transport fuels. New refining capacity can change regional balances over time, not within a disrupted quarter.
Why it matters
Marine fuel is an input into nearly every globally traded physical good. A persistent bunker-price shock can raise freight rates, widen the cost gap between nearby and distant suppliers and feed into consumer prices with a lag. The effect is less visible than a gasoline sign but potentially broader because it touches industrial supply chains.
The shortage also reveals how multiple disruptions compound. War reduces refinery output and reroutes ships. Low inventories remove the buffer. Strong margins encourage refiners to favour other products. None of these factors alone guarantees a sustained crisis, but together they make prices more sensitive to another outage.
The 218,000-barrel deficit remains a forecast, and a ceasefire, refinery restart or demand slowdown could ease conditions. The clearest evidence to watch is physical: export volumes from Russia and the Gulf, hub inventories, refinery operating rates and the bunker premium over crude. Until those improve, shipowners and cargo customers should expect fuel to remain a significant source of freight-cost risk.