The global shipping industry is experiencing a shortage of fuel oil, primarily due to reduced crude oil availability and refiners' preference for producing diesel. This situation could potentially impact global trade. The shortage is attributed to the ongoing US-Israel conflict regarding Iran and Russia's war on Ukraine, which has disrupted fuel oil supplies used by ships and power plants.
Heavy fuel oil (HFO), commonly known as bunker fuel, is the primary fuel used by ships. Analysts indicate that the wars in West Asia and Europe, along with refiners opting for more profitable fuel types, have led to this shortage. Data from energy analytics firm Kpler shows that Middle East fuel oil exports decreased by 45 percent year-on-year to an average of 447,000 barrels per day (bpd) from March to August.
Energy consultancy Energy Aspects reported to Reuters that it expects a deficit of 218,000 bpd in the fuel oil market during the third quarter, marking the first shortfall since the third quarter of 2025. The conflict in the Strait of Hormuz, a critical maritime trade route, has further complicated the situation, as approximately 20 percent of global oil and gas transit through this area.
Iran's retaliatory actions against US interests have also affected oil facilities in the Gulf. Additionally, attacks by Yemen's Iran-aligned Houthis on shipping routes in the Red Sea and around the Bab al-Mandeb Strait have disrupted supply chains.
Royston Huan, a senior oil products analyst at Energy Aspects, noted a 400,000 bpd reduction in ship fuel sales compared to the previous year, translating to an average of two million tonnes of fuel oil less each month. This loss is comparable to China's total bunker sales volume.
The ongoing war in Ukraine has also impacted oil supplies, with Ukrainian drone attacks affecting Russian refinery output. Russia's fuel oil exports in August reached a record low of 591,000 bpd, down from over 860,000 bpd in 2025.
As a result, less crude oil is being shipped from key oil-producing regions, leading to an overall supply shortage. Oil companies are prioritizing the production of petrol, diesel, and jet fuel over fuel oil due to higher profit margins. For example, Nigeria's Dangote refinery has increased its diesel, petrol, and jet fuel exports while reducing fuel oil exports.
Market observer Sunil Reddy indicated that the profitability of diesel is a significant factor in the global ship-fuel shortage, as refiners are incentivized to produce more diesel and petrol from crude oil, thereby reducing the availability of fuel oil.
The shortage of ship fuel is expected to have a considerable impact on global shipping, particularly in Asia, which relies heavily on Gulf supplies. In Singapore, the world's largest bunker hub, fuel oil prices have risen by 76 percent since the onset of the Iran conflict, reaching nearly $825 per metric tonne as of September 1.
Fuel oil stocks in Amsterdam-Rotterdam-Antwerp and Fujairah are also reported to be approximately 30 percent below their three-year seasonal averages. Reddy emphasized the interconnectedness of global supply chains and warned that a scarcity of ship fuel could lead to increased costs and potentially halt some trade.
Huan noted that rising ship fuel production costs would be passed on to end users, while Hamad Hussain from Capital Economics stated that the lack of fuel oil supply is exerting upward pressure on prices, likely to remain high until the Middle East conflict is resolved.