Holding tanks are seen in an aerial photograph at Colonial Pipeline's Dorsey Junction Station in Woodbine, Maryland, U.S. May 10, 2021. REUTERS/Drone Base
By Serene Cheong and Nicholas Lua
Oct 16, 2026 (Bloomberg) –Accelerating crude exports through the Strait of Hormuz aren’t translating into higher production of a dirty shipping fuel, according to a top Vitol Group executive, tightening supplies and sending prices soaring.
The Middle East conflict has reduced fuel oil supply from the Persian Gulf, including from Iran, by 800,000 tons per month, while Ukrainian attacks on Russian refineries have cut supply by 1 million tons per month, Vitol’s Asia head Kieran Gallagher said at a conference in Singapore this week.
“Many are looking to increased crude flows through the Strait of Hormuz as a silver bullet, but more crude does not necessarily mean more high-sulfur fuel oil,” Gallagher said at Sibcon. “Refining margins are exceptionally strong and refiners have been maximizing throughput to capture those returns,” he added, referring to refiners prioritizing other products such as diesel.
The supply squeeze stemming from the two wars has driven prices of high-sulfur bunker fuel made with HSFO in Singapore to the highest level since April, according to data provider ClearLynx LLC. The city-state is the world’s biggest supplier of ship fuel. On Thursday, HSFO costs in Asia soared relative to crude, rising to a seven-month high, according to Bloomberg Fair Value data.
Demand for HSFO as a refinery feedstock is adding to the squeeze. North Asian refiners are set to use more than 1 million tons of HSFO to feed upgrading units in November after disruptions to Saudi crude exports from the Red Sea, said Gallagher. Restoring medium and heavy oil supplies to those processors would reduce their reliance on fuel oil as a feedstock and release those barrels back into the bunker pool, he added.
Read More: Ship Fuel Market Fragments as Middle East Conflict Hits Trade
The picture is less strained for another shipping fuel, low-sulfur fuel oil. That market is “more benign” because China continues to export barrels, while Nigeria’s Dangote refinery has increased its operating rates since August and is exporting two to three Suezmax cargoes per month, Gallagher said.
Even there, some pressure remains. Bunker suppliers and traders present at Sibcon said there’s fierce competition for blending components used to reduce impurities, flammability and viscosity in ship fuel to produce LSFO grades.
© 2026 Bloomberg L.P.
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Shipowners are facing an increasingly fragmented fuel market as disruptions triggered by the Middle East conflict raise concerns about the availability and quality of supply.
Saudi Arabia is looking at ways to expand its oil pipeline capacity to destinations outside the Persian Gulf to 10 million barrels a day within two to three years, said Energy Minister Prince Abdulaziz bin Salman.
Indian refiners have cut back Russian crude purchases for November delivery, as rising competition from China pushes up prices at a time when buyers can tap alternative shipments from the Middle East.
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