Crude is flowing again, but the fuel ships burn is not

The noise is in barrels, the signal in fuel oil

The week's headline was the flow figure. According to the Jerusalem Post, CENTCOM commander Admiral Brad Cooper said on 16 October that 400 ships and 100 million barrels of oil had passed through Hormuz the previous week. That works out at roughly 14.3 million barrels a day. Kpler, in a Reuters report carried by BOE Report, measured flows over the seven days to 13 October at 11.62 million barrels a day, or 68% of the pre-war level of 17.15 million. The two counts use different methods, and both are reported here.

The quieter parameter lies elsewhere. In a Reuters report carried by Baird Maritime, Vitol's Asia head Kieran Gallagher told the SIBCON conference in Singapore on 16 October that high-sulphur fuel oil supply from the Gulf was running at least 800,000 tonnes a month below February. High-sulphur fuel oil is the heavy fuel that ships burn and refiners process in their conversion units. Bloomberg, in a story carried by gCaptain, quoted Gallagher's shorthand: more crude does not automatically mean more fuel oil. The recovery in crude flows is not closing the gap in shipping's own fuel.

1 · Geopolitical supply and logistics constraint

Kpler data show fuel oil exports through Hormuz averaging 3.7 million tonnes a month between January 2025 and February 2026. The loss peaked at 2 million tonnes a month in May and eased to 800,000 tonnes in October, which means about 22% of pre-war flows are still missing. According to Oilprice, Gallagher said producers are paying higher freight and risk premiums to get cargoes out through Hormuz. In July Vitol began bunkering at Pakistan's Gwadar port as an alternative to Fujairah, a sign that even the Gulf's largest bunkering hub is now seen as risky.

The logistics constraint has also spread geographically. UKMTO warnings show two tankers were hit on 16 October, 68 and 78 nautical miles north-east of Jubail in Saudi Arabia. One was struck by an unidentified projectile, the other by a rocket launcher fired from a small boat. According to Al Jazeera, UKMTO counted at least 12 attacks in the week to 16 October and said most of the vessels targeted had not reported them. AFP reported that the Revolutionary Guards said on 17 October that two supertankers had hit mines; CENTCOM maintains the strait has been cleared of mines. The threshold is this. If attacks settle into the loading waters of the northern Gulf, it is no longer the route around Hormuz but the cargo itself that becomes uninsurable.

2 · Supply security and critical thresholds

The other half of the gap comes from Russia. Gallagher estimates that Ukraine's strikes on Russian refineries remove about 1 million tonnes of fuel oil supply a month, taking the total with the Gulf loss to 1.8 million tonnes. The figure is a trader's estimate and could not be independently verified. On the demand side, Bloomberg reports that North Asian refiners will use more than 1 million tonnes of fuel oil as feedstock in place of crude in November, because Saudi crude shipments from the Red Sea have been disrupted. Ships and refiners are bidding for the same barrel.

The price threshold is clear. LSEG data put Singapore's spot premium for 380-centistoke fuel oil at 5.10 dollars a tonne on 27 February; this week it approached 50 dollars. According to Bloomberg, the price of high-sulphur fuel oil relative to crude in Asia hit a seven-month high on 15 October. On the crude side, Trading Economics shows Brent rising 3.72% to 109.86 dollars on 16 October. The critical threshold: if the premium holds above 50 dollars a tonne for two weeks and Brent breaks 110 dollars, bunker costs come under pressure from residual fuel and crude at the same time.

The picture in middle distillates is mixed. Business Today reports that India on 16 October cut its diesel export duty from 16 rupees to 8.5 rupees a litre and raised the petrol duty from 0.5 rupees to 2.5 rupees. According to BOE Report, the International Energy Agency decided on 15 October to release more than 20 million barrels of diesel. Diesel has both a stock buffer and an export buffer in play. Fuel oil has no comparable joint stockpile, and that is why the constraint has lodged in residual fuel.

3 · Second-order effects

Bunker fuel is the largest variable item in shipping costs, so the fuel oil premium feeds straight into freight calculations. Vitol delivers about 15 million tonnes of marine fuel a year and will start LNG bunkering in Singapore in the coming weeks. The Maritime and Port Authority of Singapore says the port's LNG bunker sales reached 487,100 tonnes in January–September, up more than 21% on a year earlier. The shift shows shipowners want to move away from heavy fuel, but most of the fleet cannot switch fuels in the near term.

The chain reaches Türkiye through freight and insurance. Rising fuel and war-risk costs on crude and product cargoes from the Gulf and the Red Sea are being added to the transport bill of Turkish refiners and foreign trade. Talay's 16 October report argued that the constraint had shifted to inventories; this week it has dropped into the fuel tanks of the ships that carry those inventories.

4 · Falsifier

Our thesis is that even if crude flows recover over the next three months, the bunker fuel gap will not close and the Singapore premium will stay above 30 dollars a tonne. We put the probability at 50%. The thesis would be refuted if Kpler's monthly data show Gulf fuel oil exports returning above 3.5 million tonnes a month, or if LSEG's 380-centistoke Singapore premium falls below 20 dollars a tonne by the end of November.