Global fuel oil market stays tight as conflicts hit Mideast, Russia supplies, Vitol says

By Florence Tan

SINGAPORE, Oct 16 (Reuters) - A resumption of hostilities around the Strait of Hormuz is supporting high-sulphur fuel oil (HSFO) premiums as supplies remain tight on lower exports from the Middle East and Russia while bunker demand stays robust, Vitol's Asia head said.

HSFO flows through Hormuz, including Iranian supplies, remain down by at least 800,000 metric tons per month from February, Kieran Gallagher said at the Singapore International Bunker conference (SIBCON) this week.

Exports via Hormuz averaged about 3.7 million tons a month between January 2025 and February 2026, Kpler data showed.

While the volume improves on the 2 million tons loss in May, attacks on Russian refineries have led to an additional estimated monthly loss of 1 million tons of fuel oil, he added.

Spot premiums for 380-cst HSFO hovered near $50 a ton this week versus a $5.10 premium on February 27, LSEG data showed.

"Producers are paying higher freight rates and more risk premiums to shuttle cargoes out of Hormuz, recognising the importance of oil revenues to their national budgets," Gallagher said.

However, attacks on shipping and oil infrastructure remain a threat, putting at risk supplies that the market currently assumes will be available, he added.

Some North Asian refiners have switched to processing fuel oil at their upgrading units instead of crude, drawing more than 1 million tons of HSFO for November, after recent disruptions to Saudi Arabia's crude exports from the Red Sea, Gallagher said.

"The key lies in replacing fuel oil with crude as a refinery feedstock," he added.

By contrast, conditions in the low-sulphur fuel oil market are more benign, he said, pointing to higher exports from China and Nigeria's Dangote refinery, which is exporting two to three Suezmax-sized cargoes a month.

MORE BUNKERING OPTIONS

In response to the Middle East disruption, Vitol began bunkering at Pakistan's Gwadar Port in July, offering an alternative to United Arab Emirates' Fujairah, which lies just outside the Strait of Hormuz, to serve customers operating in the Gulf region.

The world's largest independent oil trader, Vitol delivers about 15 million tons of bunker fuel per year and is also diversifying the types of fuels it can supply to shippers.

Vitol expects to start liquefied natural gas deliveries in Singapore in coming weeks and is also keen to explore opportunities to supply bio-LNG, Gallagher said.

Vitol expects to receive an LNG bunker vessel in November and two more next year.

Singapore's January-to-September 2026 LNG bunker sales totalled 487,100 tons, up more than 21% from a year earlier, data from the Maritime and Port Authority of Singapore showed Wednesday.

"That growth has continued against a challenging backdrop," Gallagher said.