Ship Fuel Market Fragments as Middle East Conflict Hits Trade

(Bloomberg) — Shipowners are facing an increasingly fragmented fuel market as disruptions triggered by the Middle East conflict raise concerns about the availability and quality of supply.

Ships can’t always refuel at familiar ports if they’re forced on longer journeys around Africa and diverted to the Atlantic Basin to avoid escalating hostilities near the Strait of Hormuz and the Red Sea. That’s turned other locations into so-called bunkering hubs and driven up fuel prices.

“No one can treat bunkering as a routine, last-minute decision anymore,” said Frederik Guttormsen, Asia Pacific president at Stolt-Nielsen Ltd., an operator of 167 tankers that transport chemicals worldwide. “We’re securing fuel earlier and tracking availability and lead times at key ports because the risk is now as much about prompt supply as about price.”

Middle East oil flows are coming under renewed strain from recent attacks in the region, including on vessels transiting Hormuz. The disruptions are pushing oil and bunker prices higher, Guttormsen said. He made the comments on the sidelines of a shipping conference in Singapore known as Sibcon.

Singapore, the world’s biggest ship-refueling hub, continues to see growth, while vessels are tending to avoid Fujairah on the east coast of the United Arab Emirates, south of Hormuz. Other locations seeing higher bunkering demand since the US-Iran war include Port Louis in Mauritius, South Africa, West Africa, Brazil, Sri Lanka and Pakistan, according to participants at Sibcon.

Bunkering at less familiar ports may expose shipowners to smaller or less reputable sellers, as well as wider price disparities between locations. Differences can reflect factors including fuel sourcing, access to on-spec feedstock and the availability of support services needed to ensure quality and compliance.

“In this market, procurement needs to be much more structured,” said Kenneth Dam, executive director and global head of bunkering at TFG Marine, a major trader and supplier of ship fuels. Vessels are also refueling more frequently and taking smaller volumes at each stop to avoid locking in too much fuel at a particular price and port, he said.

Disruptions are also becoming more frequent, leading to vessel diversions that are shifting fuel demand to other locations, said Peter Grünwaldt, head of bunkering at tanker owner Hafnia Ltd. and co-chief executive officer of bunker trader Seascale Energy. “We’re making sure we have fuel available at these ports,” he said.

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