The closure of the Strait of Hormuz has inflicted disproportionate damage on the global fuel oil market - far more than on gasoline, diesel or any other refined petroleum product, "Hvylya" reports, citing Bloomberg.
The strait is not just a chokepoint for crude oil. It is also the conduit for massive volumes of fuel oil refined at Saudi, Kuwaiti and Emirati plants. Those facilities produce roughly 20% of the world's internationally traded fuel oil, according to the International Energy Agency. By contrast, the Persian Gulf is "far less important" for other products like gasoline.
The asymmetry is rooted in crude chemistry. Arab Light, Saudi Arabia's flagship export grade, yields about 50% residue - the raw material for fuel oil - when processed through a distillation column. A barrel of West Texas Intermediate produces only 33% residue. This means that even when Asian refiners source alternative crude from the US or Russia, the output of fuel oil per barrel is significantly lower than what Gulf crude delivers.
The result has been an unprecedented price surge. Fuel oil in Singapore has reached $140 a barrel, while in Fujairah - located just outside the now-closed strait - it trades at nearly $160. Some environmentally compliant grades have hit $175, well above the peaks of 2008 and 2022. Vincent Clerc, CEO of AP Moller-Maersk, warned that without action, Asia's refueling ports risk running dry. "If we do nothing, we risk ending with dry supply points in Asia," he told Le Monde.
The industry is responding by redirecting fuel oil from European and American ports to Asia. But the world has already used its main shock absorbers - strategic petroleum reserves and refinery bypasses - leaving higher prices as the only remaining tool to curb demand.
Also read: Gulf states face an impossible choice after the Iran war, Ignatius warns.