HSFO Prices Surge 40% as Iran War Chokes Singapore Bunkering Hub

The price of high-sulfur fuel oil (HSFO) has jumped over 40% as the ongoing conflict involving Iran disrupts tanker traffic through the Strait of Hormuz, tightening fuel supplies in Asia and impacting the critical bunkering hub of Singapore. The Middle East, a major global supplier of fuel oil, particularly HSFO, is experiencing curtailed shipments due to the war, stranding supplies and driving up prices.

Impact on Fuel Oil Prices

HSFO prices in Singapore have increased by more than 40% since the start of the conflict. Low-sulfur fuel oil (LSFO) and very low-sulfur fuel oil (VLSFO) prices have also strengthened, with LSFO prices rising approximately 30% since the war began [Reuters]. These price increases are expected to continue as long as Middle Eastern fuel oil supply remains constrained.

Ripple Effects on Global Trade

The higher fuel costs for ships will inevitably raise the price of transporting goods, potentially exacerbating existing inflationary pressures [Reuters]. Asian buyers are actively seeking alternative fuel oil sources, but options are limited.

Search for Alternative Supplies

Traders are exploring potential supply sources in the Americas, including Venezuela, but available volumes are insufficient to meet the growing demand [Reuters]. While Venezuela’s market has recently opened, fuel oil cargoes have so far been traded primarily in the West. Russia and Iran are also fuel oil exporters, but sanctions pose challenges for many buyers, particularly outside of China.

Jet Fuel Prices Also Soar

The impact extends beyond HSFO, with jet fuel prices in Singapore experiencing a significant surge, rising 72% due to the conflict [Reuters]. Jet fuel is particularly exposed to fluctuations in the crude oil barrel.

ADNOC Increases Singapore Storage Capacity

In anticipation of continued supply disruptions, the Abu Dhabi National Oil Co (ADNOC) has leased fuel oil storage in Singapore for the first time [Reuters], signaling a strategic move to secure supplies in the region.

Current Market Sentiment

“Everyone is struggling to find oil for the second half of March,” a Singapore-based trader told Reuters [Reuters]. The cost of tankers is high, and arbitrage opportunities to Singapore are currently closed.