Supply constraints for marine fuel at major global shipping hubs have eased, despite continued disruptions to oil exports through the Strait of Hormuz following the Iran war, industry executives said on Thursday at the APPEC industry conference.
Rishi Nyati, managing director of shipping company Emarat Maritime, said ship operators are currently able to source marine fuel, known as bunkers, and load it onto vessels without major difficulty. He said the situation is significantly better than in March and April, when concerns over fuel availability were more severe.
However, the easing in physical supply has not translated into lower costs for shipowners. Prices of very low-sulphur fuel oil (VLSFO), a major marine fuel, in Singapore, the world’s largest bunkering hub, are now more than 60% above levels recorded before the war.
Prices surged after the United States and Israel attacked Iran in late February, triggering concerns about oil supplies and shipping through the Strait of Hormuz. Although prices have fallen from record highs reached in March, they remain volatile and significantly elevated.
Max Tay, Asia head of heavy products at refiner Repsol, said there is currently no major shortage of fuel oil, but the market remains vulnerable to smaller supply disruptions. He said traders and suppliers have been able to find alternative sources despite reduced flows through Hormuz.
Tay said the bigger concern is the availability of blending stocks needed to produce marine fuels that meet the specifications required by particular customers and markets. Any disruption to these components could create temporary shortages even if overall fuel supplies remain adequate.
In Fujairah in the United Arab Emirates, another major global bunkering centre, bunker activity has recovered to around 40% of pre-war levels, according to Tay. Singapore, however, has maintained relatively steady bunkering activity since the conflict began.
Nyati said the Strait of Hormuz has not been completely closed, with around 10 to 15 commodity vessels transiting in both directions each day through the Omani corridor on the southern side of the waterway. He said the continued movement of oil is helping the market secure replacement supplies.
Despite this, higher marine fuel prices are making shipping companies and fuel buyers more cautious about purchases. Sheen Mao Choong, chief operating officer at Equatorial Marine Fuel Management Services, said suppliers can obtain replacement barrels, but some volumes may not enter the market if prices are considered too high.
The comments suggest that the marine fuel market has adapted to the prolonged disruption around Hormuz, preventing a widespread supply crunch for now. However, industry participants warn that continued geopolitical uncertainty, high prices and possible disruptions to blending stocks could still tighten supplies and push up refuelling costs for ships.