Asian Shipping Faces Persistent Fuel Oil Price Shock

The shift in the high-sulphur fuel oil (HSFO) market is stark. In mid-October, Singapore’s November crack against Dubai crude climbed above $10 per barrel, a dramatic reversal from the $5 discount seen in February. This decoupling means shippers are paying a premium driven by acute regional scarcity rather than just global oil price volatility. The shortage is uniquely concentrated in Asia, evidenced by the Singapore–Rotterdam HSFO swap spread, which hit a record $95 per tonne in early October.

Supply volatility remains the primary catalyst. Middle Eastern exports to Singapore, which plummeted to roughly 40,000–50,000 barrels per day in recent months, failed to find a stable replacement. While Russian shipments initially filled the gap, those volumes collapsed to 25,000 barrels per day by September as refinery disruptions from drone strikes limited exports. This leaves Singaporean markets simultaneously exposed to supply shocks from two critical regions. Furthermore, high freight rates—now approximately $230 per tonne for a Mediterranean–East Asia voyage—have rendered traditional arbitrage from Western markets economically unviable.

While China’s recent export quota allocations and cooler seasonal temperatures in the Gulf may offer marginal relief for very-low-sulphur fuel oil, the outlook for HSFO remains precarious. With a growing global fleet of scrubber-equipped vessels maintaining steady demand, the market remains vulnerable to further supply interruptions. Without a correction in shipping costs or a sustainable increase in regional supply, the price pressure on Asian trade routes is unlikely to dissipate in the near term.