Fuel oil prices have surpassed the peaks of both the 2008 financial crisis and the 2022 energy shock, yet the surge has received far less attention than headline crude benchmarks, "Hvylya" reports, citing Bloomberg.
Wall Street closely monitors West Texas Intermediate and Brent crude - benchmarks tracked by everyone from bond investors to central bankers. But only refiners buy crude directly. The real economy runs on refined products: gasoline, diesel and fuel oil. And it is fuel oil - the product that powers the world's container ships and bulk carriers - where the price shock is most severe.
In Singapore, the world's largest bunkering port, fuel oil is trading at $140 a barrel. In Fujairah, a critical refueling hub near the Strait of Hormuz, prices have reached nearly $160 - with certain environmentally compliant grades changing hands at $175. Traders are quoting prices valid for just minutes, on a "take it now or miss out" basis.
The cause is the closure of the Strait of Hormuz, which has cut off flows from Persian Gulf refineries that produce roughly 20% of globally traded fuel oil, according to the International Energy Agency. The problem is structural: Persian Gulf crude yields about 50% residue - the feedstock for fuel oil - compared with 33% from American WTI. Replacing Gulf barrels with US or Russian crude produces less fuel oil per barrel processed.
Vincent Clerc, CEO of AP Moller-Maersk, confirmed the industry is scrambling. "We are starting to organize ourselves to transfer stocks from one continent to another and continue operating," he told Le Monde. But with strategic petroleum reserves already tapped and refinery bypasses exhausted, only demand destruction through higher prices remains as a balancing mechanism.
Also read: Tankers abruptly turned around mid-ocean as Europe's LNG bidding war erupted.