The shipping industry faces a looming fuel oil shortage, projected at 218,000 barrels daily this quarter, as refiners prioritize diesel production due to global supply disruptions and record-high margins. Asia is expected to be most affected.
The looming shortage of shipping fuel, particularly impacting Asia, could lead to increased operating costs for maritime transport and potentially affect global trade flows and commodity prices.
The global shipping industry is facing a significant fuel oil shortage, projected to reach 218,000 barrels per day in the current quarter, according to Energy Aspects. This marks the first such deficit since 2025, when the shortage was considerably smaller at 6,000 barrels daily.
Analysts attribute the tightening supply to a confluence of factors, including protracted supply disruptions in the Middle East, where hostilities have impacted as much as a fifth of regional refining capacity, totaling approximately 9.6 million barrels daily. Additionally, Ukrainian drone attacks on Russian diesel production have led to Russia imposing a ban on diesel exports, further constricting global supply.
Refiners worldwide are prioritizing the production of diesel fuel over fuel oil, which is crucial for powering ships and some power plants. This prioritization is driven by record-high refinery margins and critically low inventories of gasoline and diesel. Energy Aspects analyst Royston Huan noted that these conditions incentivize refiners to maximize secondary unit runs, which in turn tightens fuel oil balances, with no immediate prospect of a shift in priorities.