SINGAPORE: Fuel oil traders in Asia are facing supply shortages as the Iran war disrupts shipments from key Middle Eastern suppliers through the Strait of Hormuz, forcing buyers to search for alternative supplies from Western markets.
The disruption is expected to affect the availability of bunker fuel used by ships, particularly at major refuelling hubs such as Singapore. Rising bunker fuel costs could increase operating expenses for shipping companies and eventually raise global transportation costs.
Fuel oil exports passing through the Strait of Hormuz to Asia usually average around 1.2 million metric tons per month (about 246,000 barrels per day), with roughly 70% heading to Southeast Asia, according to shipping data. Overall fuel oil exports via the route normally total about 3.7 million tons per month.
However, tanker transits through the chokepoint have dropped by around 90% compared with last week, sharply tightening supply. The shortage has triggered a rally in fuel oil markets. Prices for high-sulphur fuel oil delivered in Singapore have risen more than 40% since the conflict began, while low-sulphur fuel oil prices have climbed over 30%.
Traders say alternative supplies could come from the United States, Mexico, or Venezuela, but available volumes remain limited. Russian supplies are another option, though many buyers remain cautious because of sanctions linked to the Russia-Ukraine War.
Meanwhile, shipments of Iranian fuel oil — already under sanctions — have also halted due to the ongoing conflict. China, which typically continues to purchase Iranian fuel, is expected to increase imports from Russia if Iranian supply remains disrupted.
Regional Asian refiners may also provide additional volumes, but their output is likely to fall as the Middle East conflict tightens crude oil supply.
Although Singapore currently holds significant fuel oil inventories both onshore and in floating storage, traders expect stockpiles to decline rapidly in the coming weeks as supply disruptions continue.
