Demand for fuel oil against forecasts due to red sea disturbances and the expansion of the shadow fleet
Oil fuel used on ships and power plants see unexpected requests, with an effort to curb its use more than balanced by a fleet that extends from oil tankers serving Russia and others, and longer shipping routes when the ship avoids the Red Sea.
Instead of switching to cleaner alternative combustion such as sea gasoil and low sulfur fuel oil, many sender has installed exhaust gas cleaning devices known as scrubbers to continue to use high sulfur fuel oil. Western sanctions and shipping attacks in the Red Sea increasingly encourage this unexpected demand.
“The fuel market has shown extraordinary resistance, with requests outperforming expectations because of several major factors, such as demand for power plants that are still companies in the Middle East and red sea delivery disorders due to Houthi attacks,” said Royston Huan, analysts in the energy aspect in August.
While global demand for diesel and jet fuel has fallen globally since 2019 pre-Pandemic levels, and gasoline consumption has increased by only 1.9%, demand for fuel oil rose by 4.8% to an average of 6.5 million barrels per day (BPD) in 2025, according to the annual report of the International Energy Agency.
Fuel oil can still strengthen the short term because of the demand from the refinery, but we hope that the supply balances will be more loose in November to December in addition to returning several refineries in Saudi Arabia and Brazil from maintenance, Huan added.
Demand for fuel oil soaring expectations through
In 2020, IEA had estimated the demand for fuel oil would grow only 1.6% between 2019 and 2025 – the slowest speed between the main processed fuel.
Analyst IEA Ciaran Healy told Reuters that the use of fuel oil in power plants had slightly outperformed the expectations of agencies in recent years, most of it because of the hotter summer in the Middle East and North Africa.
Saudi Arab and Egyptian Saudi Fuel Oil Imports rose 33% of the years-to-year in 2024 and remain around 31% higher in 2025 so far compared to 2023, according to the KPler shipping data company.
Western sanctions against Russia have also contributed, with Saudi Arabia importing Russian fuel oil discounts to free more of its own crude oil for exports.
Red Sea Diversion, Shadow Fleet
More ships are now traveling around the Cape of Good Hope than the Suez canal, increasing the demand for fuel oil, when the conflict in the Red Sea continues.
Ships have avoided the region since 2023 due to an attack by Houthis in harmony with Iran Yemen, which aims to disrupt global shipping as a protest over the war in Gaza.
This transfer has increased the demand for fuel oil by around 100,000 BPD, around 2% of the demand for global bunker, according to FGE consultation.
IEA, however, believes that the delivery disorder in the Red Sea has given a smaller push than the awaited for the volume of bunkering, Healy said.
Western sanctions against Iran and Russia have also triggered the growth of the aging ship’s shadow fleet that is likely to run with high sulfur fuel oil, or HSFO, said Valerie Panopio, analyst at Rystad Energy. Such ships usually have a blurred ownership structure and sail without western insurance protection or safety certification.
The shadow fleet consists of 1,200 and 1,600 tankers, according to estimates of industrial sources and analysts, including the Lloyd and Gibson ships, representing about one fifth of the global tanker fleet.
It will imply a shadow fleet tanker to consume more than 106,000 BPD, or around 2% of global demand, based on Reuters calculations using Bunker 2023 data from international maritime organizations.
“Many of these ships will be a saying of more than 15 and in some cases, in some cases, even more than 20 years,” said FGE Eugene Lindell, added that these ships are less fuel efficient and do long-distance routes, increasing fuel oil consumption.
Adoption of Scrubber and Regulation Challenges
The 2020 IMO Regulation reduces the limit of sulfur content in sea fuel from 3.5% to 0.5%, initially reduces HSFO demand.
However, the extended scrubbers adoption – an onboard system that allows ships to burn HSFO while reducing the environmental impact – has encouraged recovery of consumption.
At the end of 2024, more than 6,000 ships had installed a scrubbers, according to the DNV Maritime Consultant, which hoped that the number would reach 6,523 at the end of the year, up from 4,348 in 2020.
Although the estimated IEA shows that fuel demand decreases after 2026, the average of 6.1 million BPD in 2030, the opposition to the IMO regulation can maintain demand. The energy aspect says that the administration of US President Donald Trump has rejected the Rules of IMO emissions that are tighter and propose carbon prices, which can delay their implementation.
“Demand for fuel oil will be sticky, at least, at the end of this decade,” said Kenneth Tveter from Shipbroker Clarksons.
Source: Reuters
