A shortage of fuel oil used by ships and power plants is expected to emerge in the third quarter (Q3) of 2026 as refiners affected by wars, refinery disruptions, and tanker traffic constraints prioritize diesel and other refined products.
While crude oil prices have avoided major spikes in recent months, refined product prices have risen sharply as refinery damage in Russia and the Middle East, alongside restrictions on shipping, disrupt supply. China has also reduced refining activity and exports to preserve domestic stocks.
The tightening fuel oil market is expected to increase costs for shipowners and power generators, with higher bunker fuel prices potentially pushing up shipping rates.
Asia is expected to be the hardest-hit region due to its reliance on Gulf supplies disrupted by the Iran war. Singapore, the world’s largest bunker hub, imports more than half of its nearly 1 million barrels per day (mmbbl/d) of fuel oil demand, according to Kpler data.
Energy Aspects forecasts a fuel oil deficit of 218,000 barrels per day (bbl/d) in Q3, marking the first projected shortfall since Q3 2025, when the deficit stood at 6,000 bpd.
“Due to the protracted supply disruption in the Middle East, we expect fuel oil supply to remain critically tight in the third quarter,” Rystad analyst Valerie Panopio told Reuters.
Fuel oil joins gasoline, diesel, and jet fuel among refined products struggling to keep pace with demand.
In Russia, Ukrainian drone attacks have disrupted refinery output, with fuel oil exports falling to a record-low 591,000 bbl/d in August, compared with an average of more than 860,000 bbl/d in 2025, according to Kpler data dating back to 2017.
Meanwhile, Middle East fuel oil exports declined 45% year on year (YoY) to an average of 447,000 bbl/d between March and August.
Refinery outages have also affected Kuwait’s Al-Zour refinery, a major fuel oil exporter. The refinery has shipped only one 26,000-bbl/d cargo since March, compared with around 191,000 bbl/d during January-February, Kpler data showed.
