High-sulfur fuel oil supplies have lost roughly 1.8 million tons per month — enough to fuel several hundred large container ships — and Vitol says the shortfall will not close even with record crude moving through the Strait of Hormuz.

The number comes from Kieran Gallagher, Vitol's Asia head, who spoke at the Sibcon conference in Singapore this week. The Middle East conflict has cut fuel oil supply from the Persian Gulf, including Iran, by 800,000 tons per month. Ukrainian attacks on Russian refineries have removed another 1 million tons per month. Together, that is a monthly deficit equivalent to about 18 Very Large Crude Carrier cargoes' worth of bunker-grade material.

The market has already priced it in. Singapore HSFO prices have climbed to their highest level since April, according to data provider ClearLynx LLC, and on Thursday HSFO costs in Asia surged relative to crude to a seven-month high on Bloomberg Fair Value data. Singapore is the world's largest bunkering port, so the move touches every operator refueling in Asia.

Why doesn't more crude mean more fuel oil?

Gallagher directly addressed the assumption that accelerating crude exports through Hormuz will rebuild bunker stocks. It won't, he argued, because refiners are chasing stronger margins elsewhere.

"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 — meaning diesel and other distillates take priority over residual fuel oil.

For shipowners and operators of scrubber-fitted tonnage, the consequence is straightforward: HSFO's traditional discount to low-sulfur alternatives is eroding in Asia, weakening the economics that justified scrubber retrofits. Bunker buyers in Singapore face a physically tighter, more fragmented supply pool at the same time.

Is demand making it worse?

Yes. Refineries themselves are now competing for the same barrels.

North Asian refiners are set to consume more than 1 million tons of HSFO as feedstock for upgrading units in November, Gallagher said, after disruptions to Saudi crude exports through the Red Sea. That demand would normally be met with medium and heavy crude; with those grades disrupted, fuel oil becomes the substitute.

Gallagher offered a conditional fix, with an equally conditional caveat: restoring medium and heavy crude supplies to those refiners would reduce their reliance on fuel oil and release barrels back into the bunker pool. Whether those crude flows recover depends on Red Sea security — a variable no fuel trader controls.

What about low-sulfur fuel oil?

The LSFO picture is calmer, and Gallagher used the word "more benign" to describe it. Two sources of relief are working:

• China continues to export barrels.
• Nigeria's Dangote refinery has raised operating rates since August and is now exporting two to three Suezmax cargoes per month — each Suezmax carrying roughly 150,000 tons of product.

Even so, pressure has not vanished. Bunker suppliers and traders at Sibcon reported fierce competition for blending components — the additives and feedstocks used to adjust impurities, flammability and viscosity to produce on-spec LSFO grades. Plenty of base barrels, in other words, does not automatically mean plenty of compliant fuel.

What should shippers and carriers watch?

The commercial read-through splits cleanly by fuel grade. Scrubber-equipped carriers lose their historical cost edge as HSFO premiums over crude expand; operators without scrubbers face a more competitive but not comfortable LSFO market. Forwarders and charterers pricing Asia-loop bunker adjustment factors should treat Singapore HSFO as the volatile leg of the equation through at least November, when North Asian refinery feedstock demand peaks above 1 million tons.

Gallagher's own framing invites skepticism in both directions. His supply-loss figures — 800,000 tons from the Persian Gulf and 1 million tons from Russia — are conference-stage estimates, not audited trade data, and he did not put a timeline on recovery. Equally, his "benign" LSFO call rests on Dangote sustaining two to three Suezmax loads a month, a rate the refinery has held only since August.

What he did not say matters too: no one at Sibcon offered a scenario in which HSFO supply normalizes while two wars continue to run. Until either the Persian Gulf flows or Russian refining capacity recovers, Singapore HSFO prices holding near seven-month highs look less like a spike and more like a floor.

By Marcus Bennett, Waybill Wire