High-sulphur fuel oil in Singapore now trades above the price of the crude used to make it. Disrupted Middle Eastern and Russian supply, resilient bunker demand and steep freight rates drive the squeeze. Seasonal relief may help toward year-end, but any easing is likely to be uneven.
Singapore's November high-sulphur fuel oil (HSFO) crack against Dubai crude soared above $10/bbl in mid-October, compared with a discount of around $5/bbl in February, the pre-war period. That is a reversal of more than $15/bbl for a product normally worth less than its feedstock. Higher bunker costs therefore reflect more than rising crude oil prices.
Supply losses concentrate the shortage in Asia
The Singapore–Rotterdam HSFO swap spread hit a record $95/t on October 7 before easing to $88/t. The European HSFO crack sits around -$10/bbl to Brent, and the US Gulf Coast crack has fallen below -$20/bbl.
Lost supply is the main reason for the premium. Middle Eastern shipments of HSFO and VLSFO to Singapore averaged around 100,000 b/d in 2025, vanished in April and May after disruption to Hormuz shipping, and then fell back to around 40,000–50,000 b/d in recent months. Russia first helped fill the gap, but its HSFO shipments to Singapore dropped to just 25,000 b/d by September after Ukrainian drone attacks disrupted refineries.
Demand, meanwhile, has held up. Singapore sold 4.7 million tonnes of bunker fuel in September, only 1% below a year earlier.
Freight blocks the fix
Normally, Singapore's premium would pull in Western cargoes. Freight is obstructing that. The Mediterranean–East Asia rate stands at $230/t for a 135,000-tonne cargo, so transport alone costs approximately $36/bbl for HSFO. A year ago, the same voyage cost $41/t, or $6.5/bbl.
As a result, the arbitrage from weaker European cracks loses its appeal because freight costs discourage it. Singapore's estimated October VLSFO arrivals from Western markets run at 1.5 million–1.6 million tonnes, down from 1.6 million–1.8 million in September.
Signs of easing remain fragile
Some relief has appeared. The Singapore M1-M2 time spread for VLSFO narrowed from around $38/t in early October to $32/t by October 23. Saudi Aramco has issued tenders for over 700,000 tonnes of HSFO for November exports, yet the source warns these cargoes could be trapped if security around the Strait of Hormuz deteriorates after the US mid-term elections.
Even if fuel oil cracks weaken in the coming weeks, prices themselves may not fall much while crude remains expensive.
Source: Oilprice.com
Trading involves risk.
Risk Disclaimer
