Singapore HSFO Crack Tops $10/bbl as Gulf and Russian Supply Collapse

Singapore's high-sulphur fuel oil crack (the difference between product price and crude feedstock cost) breached $10/bbl against Dubai crude in mid-October. That is a swing of more than $15/bbl from February's roughly $5/bbl discount, and it tells shippers something uncomfortable: bunker costs are rising faster than crude itself. Fuel oil, normally worth less than the oil it comes from, has become unusually expensive.

The cause is a double supply failure. Middle Eastern HSFO and VLSFO shipments to Singapore, which averaged about 100,000 b/d in 2025, vanished in April and May after disruption to Hormuz shipping. They recovered briefly to 130,000 b/d in July, then slid back to 40,000–50,000 b/d in recent months. Russia filled the gap at first, sending roughly 180,000 b/d of HSFO to Singapore in April, above the typical 100,000–150,000 b/d of 2025. By September that had collapsed to 25,000 b/d. Ukrainian drone attacks hit Russian refineries, and residue exports (the heavy bottoms that become fuel oil) fell with them.

Takeaway: Asia lost its two biggest suppliers almost simultaneously, and nothing has fully replaced either.

How wide is the regional gap?

Very wide, and the numbers show it. The Singapore–Rotterdam HSFO swap spread hit a record $95/t on October 7, roughly $15/bbl, before easing to $88/t. The European HSFO crack sits around -$10/bbl to Brent. The US Gulf Coast crack is below -$20/bbl. Singapore's premium is not a global phenomenon. It is an Asian shortage.

The two bunker grades have different supply networks, which matters for who can still buy. Russia, Iraq, Saudi Arabia and Iran anchor HSFO supply. Kuwait's Al-Zour refinery is significant for VLSFO (very-low-sulphur fuel oil, the "cleaner" post-2020 marine grade), while Brazil and Nigeria offer Atlantic Basin alternatives. VLSFO buyers have more places to source from, though longer voyages make those barrels costly.

Takeaway: VLSFO has fallback suppliers. HSFO largely does not.

What is demand doing?

Holding up better than the supply. Singapore sold 4.7 million tonnes of bunker fuel in September, down only 1% year-on-year, against average declines near 4% in July and August. HSFO sales rose about 10% year-on-year to roughly 17.5 million tonnes in January–September. The scrubber-equipped fleet (exhaust-cleaning systems that let ships burn sulphur-heavy HSFO legally) keeps growing, so weaker VLSFO offtake does not signal weaker shipping demand.

Longer voyages add a feedback loop. Replacing Gulf cargoes with US Gulf Coast or West African barrels extends sailing distances and burns more fuel, while avoiding insecure bunkering ports pushes more purchases toward Singapore itself.

China layers on more complexity. Its HSFO imports hit 3.3 million barrels in October so far, up from just 300,000 barrels in June but below March's 9.4 million barrels. Shandong's independent refiners buy fuel oil, including Russia's M100 grade, as alternative feedstock when crude import access is constrained. That autumn spurt should fade into November–December, because higher HSFO premiums erode the processing advantage once taxes, freight and conversion costs are counted. Purchases won't disappear; each refiner's crude quotas and product margins still set the economics.

Takeaway: demand bends with price but is not breaking.

Why doesn't cheap Western fuel flow east?

Freight is the blocker. The Mediterranean–East Asia rate stands at $230/t for a 135,000-tonne cargo, working out to roughly $36/bbl for HSFO and $34/bbl for VLSFO. A year ago the same voyage cost $41/t, or $6.5/bbl and $6.1/bbl respectively; the per-barrel difference between grades reflects fuel density. Those costs strangle the arbitrage that Europe's weak cracks would normally open. Singapore's October VLSFO arrivals from Western markets are estimated at 1.5–1.6 million tonnes, down from 1.6–1.8 million in September. Cheap at the loading port means little when shipping absorbs the discount.

Takeaway: the market's normal self-correction is priced out.

Is relief coming?

Some, unevenly. The Singapore M1-M2 time spread (the price gap between near-month and second-month contracts, a tightness gauge) for VLSFO narrowed from about $38/t in early October to $32/t by October 23; HSFO's spread eased from a $59/t peak to $56/t. Saudi Aramco has issued tenders for over 700,000 tonnes of HSFO for November export, loading from Ras Tanura and Jubail. China's latest 1.07-million-tonne VLSFO export quota allocation also widens the scope for domestic supply to serve regional bunker demand.

Here is the skeptic's caveat on every one of those positives. Aramco's cargoes could be trapped inside the Gulf if security around the Strait of Hormuz deteriorates after the US mid-term elections. Cooler winter temperatures should cut Gulf power-generation demand for fuel oil, freeing barrels for bunkering, since Saudi Arabia and Kuwait burn fuel oil and crude for electricity. But incremental Al-Zour barrels would likely ease shortages in Fujairah before they reach markets farther east. Lead times tell the current story: Singapore VLSFO delivery stretched to 12–15 days in mid-October, and planned refinery maintenance plus further Russian disruption could slow import replenishment despite weaker seasonal demand.

Takeaway: the easing is real but conditional, and the conditions are fragile.

What to watch

VLSFO has clearer supply growth prospects. HSFO stays exposed to Russian losses while scrubber-fitted ships hauling oil long distances keep demand steady. Even if fuel oil cracks weaken in coming weeks, prices may not fall much while crude stays expensive. Lasting relief in Singapore needs more fuel and cheaper, reliable shipping. Seasonal changes alone won't deliver that.