According to WPB, a tightening global fuel-oil market is creating a new source of cost pressure for bitumen shipping as refinery disruptions, reduced Middle East exports and stronger economics for higher-value fuels push bunker prices sharply higher.
The latest pressure is different from the maritime risks that have dominated petroleum trade during the Iran conflict. Shipowners have already faced disrupted routes, higher insurance costs and uncertainty around Hormuz, but the fuel used by those ships is now becoming substantially more expensive as well.
Middle East fuel oil exports averaged approximately 447,000 barrels per day between March and August, around 45% lower than a year earlier. At the same time, fuel oil inventories in three of the world’s most important storage and bunker hubs — Singapore, Amsterdam-Rotterdam-Antwerp and Fujairah — have fallen to roughly 30% below their three-year seasonal averages.
The price response has been significant. Very low sulphur fuel oil, or VLSFO, one of the principal fuels used by commercial shipping, rose approximately 76% in Singapore from the beginning of the Iran war to just under $825 per metric ton by September 1. Brent crude increased by around 40% over the same period, meaning the bunker-fuel market has tightened considerably faster than the underlying crude benchmark.
This difference matters directly to shipping economics. Fuel is one of the largest variable costs of operating an ocean-going vessel, and a sharp increase in bunker prices can be transmitted into voyage calculations even when the underlying cargo price does not change.
For bitumen buyers, this creates a second layer of transportation pressure. A supplier may still have physical bitumen available at the refinery or terminal, but the final delivered price can rise if the vessel consumes substantially more expensive fuel during the voyage.
The shortage is being driven by several developments occurring at the same time. Refinery disruptions in the Middle East and Russia have reduced overall production, while refineries operating under difficult crude-supply conditions are prioritizing gasoline and diesel because those products currently offer stronger margins.
This means some refinery streams that could otherwise contribute to fuel-oil supply are being directed toward secondary processing units or used to maximize production of higher-value transportation fuels. As a result, the fuel-oil balance is tightening even without a corresponding increase in normal end-user demand.
The global market is moving toward a substantial deficit. The expected fuel-oil shortfall in the third quarter has been estimated at approximately 218,000 barrels per day, compared with a deficit of only around 6,000 barrels per day a year earlier.
One of the clearest examples is Kuwait’s Al-Zour refinery, traditionally an important supplier of fuel oil. Since March, the refinery has been largely absent from normal export flows and has exported only one cargo equivalent to around 26,000 barrels per day, compared with average exports of roughly 191,000 barrels per day during January and February.
Russia is adding another source of pressure. Fuel oil exports there fell to approximately 591,000 barrels per day in August, the lowest level in Kpler data going back to 2017 and well below the more than 860,000 barrels per day averaged during 2025.
These supply losses matter because fuel oil remains deeply connected to both shipping and refinery economics. High-sulphur and very-low-sulphur grades serve different segments of the bunker market, while residual material is also used in power generation and can act as feedstock for refinery conversion units.
The competition for these barrels can intensify when diesel and gasoline markets are especially strong. Instead of selling residual streams directly as fuel oil, a refinery with suitable equipment may have an economic incentive to process more of them through conversion units to extract additional middle distillates or lighter products.
For the bitumen market, this is important because bitumen is also linked to the heavier end of the refinery barrel. Bitumen and fuel oil are not interchangeable products and every refinery has a different configuration, but both compete within decisions over how heavy residual streams should be processed or marketed.
A refinery facing exceptionally attractive margins for diesel and gasoline may therefore change the economics of producing lower-value residual products. That does not mean bitumen output is automatically being reduced, and the latest fuel-oil data do not provide evidence of a direct decline in global bitumen production.
The more defensible conclusion is that refinery economics are becoming less favorable to maximizing some heavy products at the same time as bunker-fuel supply itself is tightening.
For bitumen suppliers, the immediate effect is likely to be seen first in transportation costs rather than refinery output. Bulk bitumen requires heated vessels, and those ships consume bunker fuel while also using additional energy to maintain cargo temperature during the voyage.
A rise in bunker prices can therefore be particularly relevant to long-haul bitumen trade. Voyages from the Middle East Gulf to East Africa, India or farther into Asia can involve several days of fuel consumption, meaning a large increase in bunker cost can materially change the economics of the trip.
The impact may become even larger when vessels are forced to use longer routes. Ships avoiding the Red Sea or Bab el-Mandeb because of security risks consume additional fuel and spend more days at sea, multiplying the effect of higher bunker prices.
This creates a compounding cost problem. A shipowner can face higher fuel prices, a longer sailing distance, additional war-risk insurance and greater uncertainty around passage at the same time.
For cargo buyers, the final result is an increase in the gap between FOB and delivered prices. A tonne of bitumen may remain competitively priced at the loading port while becoming significantly more expensive after transportation costs are included.
This effect is particularly relevant for markets that depend heavily on imported bitumen. East African buyers, for example, are highly exposed to ocean transportation because much of their material must travel long distances from major producing regions.
Asian buyers can face a similar problem when traditional supply routes are disrupted and replacement cargoes must be sourced from more distant origins. Even when alternative physical supply exists, higher bunker costs can make those alternatives considerably more expensive.
The tightening fuel-oil market also introduces another challenge for vessel owners: refueling availability. A high bunker price is manageable if fuel remains readily available, but reduced inventories at major ports can create additional operational uncertainty if suppliers restrict quantities or lead times increase.
Singapore is particularly important because it is the world’s largest marine-fuel hub. A 76% rise in VLSFO prices there is therefore not a localized market signal; it affects a major reference point used throughout international shipping.
Fujairah is equally important for Gulf-linked traffic. Fuel-oil inventories there have fallen sharply, while availability of several bunker grades remains restricted. For vessels trading petroleum and bitumen through the Gulf, tightening supply at a major regional bunkering center adds another consideration to voyage planning.
The immediate implication should still be treated carefully. There is no evidence that the latest fuel-oil shortage has already caused a specific percentage increase in global bitumen transportation costs, and individual voyage rates depend on vessel size, distance, bunker consumption, charter structure and loading conditions.
Some charter agreements also separate bunker costs from the base vessel rate, while others incorporate them more directly into the freight calculation. The effect therefore varies between contracts.
Nevertheless, the direction of pressure is clear. When one of the largest operating costs for ships rises by 76% in a major bunker hub, transportation economics become more difficult even before insurance, delays and vessel scarcity are considered.
For bitumen traders, this means origin price comparisons become less useful without a full delivered-cost calculation. A cargo priced several dollars per tonne below a competing origin may no longer be cheaper if the voyage requires substantially more expensive fuel or a longer sailing route.
It also increases the value of geographic proximity. Suppliers located closer to the destination can gain a logistical advantage even if their refinery-gate price is higher because the vessel consumes less fuel and remains exposed to maritime risk for a shorter period.
This could influence trade flows if bunker prices remain elevated. Buyers may increasingly compare Middle Eastern, Asian and regional supply not only on the basis of bitumen prices but also on voyage length and refueling requirements.
The same dynamic can affect packaged bitumen. Drums, jumbo bags and containerized cargoes move through different shipping systems from bulk bitumen, but container and general-cargo carriers also consume bunker fuel and can pass higher fuel costs through surcharges or freight adjustments.
Higher bunker prices can therefore eventually influence both bulk and packaged material, although the timing and magnitude of the increase may differ.
The refinery side deserves equal attention. Bitumen producers are already operating in an environment where product economics can change rapidly according to the relative profitability of gasoline, diesel, fuel oil and other refinery outputs.
If unusually strong margins for middle distillates encourage refiners to maximize conversion of heavy streams, bitumen producers and buyers will need to monitor whether road-binder output remains commercially attractive at individual refineries.
This is not yet evidence of a global bitumen shortage. Refinery configurations vary widely, dedicated bitumen production strategies differ by market and many producers will continue supplying road binder regardless of changes in fuel-oil prices.
However, the latest fuel-oil squeeze provides an important reminder that bitumen supply cannot be analyzed independently from the rest of the refinery barrel. Decisions made in response to diesel, gasoline and residual-fuel margins can indirectly affect the economics of bitumen production.
For asphalt companies, the effect arrives farther downstream. A higher delivered bitumen cost increases asphalt production expenses, particularly in import-dependent markets where transportation already represents a substantial portion of the final binder price.
Contractors may therefore face cost pressure even if the quoted refinery price of bitumen remains unchanged. The increase can enter the project through transportation rather than through the commodity itself.
This makes bunker prices an increasingly relevant indicator for the bitumen market. Traditionally, buyers focus on refinery quotations, crude prices and regional bitumen balances, while shipping costs are considered separately. In the current environment, those markets are becoming more closely connected.
The key development is that maritime cost pressure is no longer being generated only by geopolitical risk. The physical fuel required to operate the vessel is itself becoming scarce and expensive.
If fuel-oil production recovers and refinery outages ease, bunker prices could moderate and reduce part of the pressure. Higher prices may also eventually encourage refiners to restore more fuel-oil production where operational flexibility allows.
If the shortage persists, however, expensive bunker fuel could remain an additional cost layer on top of already elevated insurance and route risks. For bitumen cargoes moving long distances, that combination could materially increase the final cost of delivery even when physical supply remains available.
For the global bitumen industry, the emerging message is therefore straightforward: having cargo available is only one part of the supply equation. The cost of moving that cargo is increasingly being determined by a tighter fuel-oil market, and the pressure is now visible in the very fuel that powers the ships carrying bitumen between regions.
By WPB
News, Bitumen, Fuel Oil, Bunker Fuel, VLSFO, Shipping, Freight, Singapore, Fujairah, Al-Zour, Refining, Asphalt
