Sources in the industry said that marine?fuel suppliers are facing a shortage of high-density low-sulphur crude, also known as heavy sweet oil, to blend because of the competition between refiners. The Iran war has disrupted Middle?East imports.
Fuel blending components are becoming less available at the same time that refiners reduce production of low-sulphur oil for marine fuel due to a crude shortage. This is causing spot premiums on residual fuel for ships.
Crude grades like Dar Blend, from South Sudan, and Australia's Vincent & Pyrenees oil are exported to Singapore and Fujairah (UAE) because of their low sulphur content and overall characteristics. This makes it easier to blend with other fuels and create 0.5% sulphur-free fuel oil for ship refueling.
According to multiple industry sources, and ship tracking data, since the Iran war began in February 2008, some of this supply has been diverted into refineries to compensate for disruptions in Middle East supply.
Kpler data shows that China imported over 300,000 metric tonnes (2,19 million barrels per month) of Dar Blend in March and April. This is up from zero in February.
As refineries run at lower intake because of a shortage of Middle East medium sour oil, they'll need to bring in heavy?crude alternative, including sweet barrels, to support maintaining runs, said June Goh. She is a senior analyst with Sparta Commodities.
Limited HEAVY CRUDE Supply
Even before the war, the supply of heavy sweet crude oil was low due to the limited production at the few fields where it can be found.
A Singapore-based trader said that oil prices have increased since the war. This has made it difficult to obtain enough to mix and produce VLSFO in this month.
Emril Jamil is a senior analyst with LSEG. He said that the loss of medium sour and run-cuts (at refineries) may cause heavy sweet crudes to be diverted into the refinery. This would leave less low-sulphur mixstock on the market.
He said that the run?cuts would also force refiners prioritise their distillate fuel production, such as jet fuel and diesel, over LSFO. This will reduce the?supply of bunkers. The surge in Brazilian imports may have cooled spot VLSFO prices from their all-time highs on March 18 of almost $140 per metric ton, but they remain above $17 compared with pre-war levels.
Fuel experts say that the'shortage of blendstocks' may also force blenders to use unconventional oils, which can cause quality problems and damage ship engines.
Chris Turner, Technical Manager at Integr8 Fuels, said: "With Middle East tensions and disruptions in the Strait of Hormuz causing supply to be constrained, it is predictable that unconventional feedstocks will be used."
Turner said, "This is not an isolated lapse of quality but a technical consequence of market pressure, which we have seen repeated across all major disruptions in the last decade."
Fuel testing agency VPS stated in an announcement this month that vessels should ask suppliers for clarification on the blend components, including alternative feedstocks.
(source: Reuters)
Vessel traffic in the Strait of Hormuz plummets, with only two ships reported, raising security concerns amid recent incidents.
TotalEnergies aims to start offshore oil production in Suriname by mid-2028, a major step for the country's energy sector.
Two US-bound vessels were allegedly compromised by hackers, prompting a joint operation by the US Coast Guard and FBI in the Gulf of Mexico.
Finland orders drills to prevent underwater sabotage as incidents in the Baltic Sea threaten critical infrastructure.
