Marine fuel suppliers are facing tightening availability of key blending components as refiners compete for limited supplies of heavy sweet crude oil, following disruptions to Middle East flows linked to the Iran conflict.
Industry sources say the scramble for these low-sulphur crude grades has intensified as refiners seek alternatives to replace medium sour oil supplies affected by instability around the Strait of Hormuz, a critical global shipping route.
Heavy sweet crude — prized for its low sulphur content and suitability for producing cleaner fuels — is typically used to blend very low-sulphur fuel oil (VLSFO), the main bunker fuel used by ships under international emissions regulations.
But since the outbreak of the Iran war in late February, a growing share of these barrels has been diverted away from marine fuel blending toward refinery processing, tightening supply in the bunker market.
“As refineries are running at lower intake due to shortages of Middle Eastern crude, they are pulling in heavier alternatives, including sweet grades,” said June Goh, a senior analyst at Sparta Commodities.
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This shift has reduced the availability of blendstocks needed to produce low-sulphur marine fuels, pushing up spot premiums for VLSFO, traders said.
Crude grades such as Dar Blend from South Sudan and Australia’s Vincent and Pyrenees streams are commonly shipped to major bunkering hubs such as Singapore and Fujairah, where they are blended into compliant fuels for the global shipping fleet.
However, recent data indicates that some of these supplies are increasingly being redirected. China, for example, has sharply increased imports of Dar Blend in March and April, according to ship-tracking data, after importing none in February.
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The competition comes at a time when supply of heavy sweet crude is already structurally limited, as it is produced by a relatively small number of fields worldwide.
“The loss of medium sour crudes and refinery run cuts may divert heavy sweet crudes into refining, leaving less low-sulphur blendstock available,” said Emril Jamil, an analyst at LSEG.
Refiners are also prioritising production of higher-value refined products such as diesel and jet fuel over low-sulphur fuel oil, further constraining supply for marine use.
As a result, spot premiums for VLSFO surged to record highs in March, reaching nearly $140 per metric ton at one point, before easing slightly on increased imports from Brazil. Premiums remain elevated, however, at more than $17 per ton compared with around $2 before the conflict.
The tightening market is raising concerns among fuel suppliers and shipping operators about potential quality issues.
With conventional blending components in short supply, some blenders may resort to using alternative or “unconventional” feedstocks to meet demand, industry experts warn.
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“With supply constrained by Middle East tensions, the use of unconventional feedstocks is a predictable response,” said Chris Turner, technical manager at Integr8 Fuels.
Such substitutions can affect fuel stability and compatibility, increasing the risk of engine damage or operational issues for vessels.
Fuel testing agency VPS has advised ship operators to verify the composition of bunker fuels and seek greater transparency from suppliers regarding blending components.
The developments highlight the broader impact of geopolitical tensions on global energy markets, extending beyond crude prices to downstream sectors such as shipping and refining.
The Strait of Hormuz, through which a significant share of global oil trade passes, remains a key chokepoint, and any prolonged disruption is likely to continue reshaping trade flows and fuel markets.
For the marine fuel industry, the challenge will be balancing supply constraints with quality requirements, as market stress tests the resilience of global fuel supply chains.
