🚢 Wars in the Persian Gulf, Black and Arabian Seas are tying up way too many ships causing fuel shortages across the globe.

Global fuel oil supply is shrinking while demand for the fuel from the shipping industry remains robust, suggesting further supply pain down the road.

Exports of high-sulfur fuel oil from the Middle East are running at a rate that is at least 800,000 tons a month lower than it was before the war, the head of Asian operations at Vitol said at an industry event.

“Producers are paying higher freight rates and more risk premiums to shuttle cargoes out of Hormuz, recognising the importance of oil revenues to their national budgets,” Kieran Gallagher said, as quoted by Reuters. The risk premium for those exports remains considerable, fueling uncertainty about future supply from the region.

Fuel oil is standard for the shipping industry, but recently, some refiners in Asia have started switching from crude oil to high-sulfur fuel oil as feedstock, Gallagher said, amid the disruption of Saudi exports from the Red Sea. These refiners have snapped cargoes totalling some 1 million tons for November delivery, the executive said.

Further complicating the fuel oil situation, Ukrainian drone attacks on Russian refineries have further crimped supply. Vitol’s Gallagher estimated that loss at some 1 million tons per month.

“The key lies in replacing fuel oil with crude as a refinery feedstock,” he said. However, this remains a challenge due to the above-mentioned shipping risks in the Strait of Hormuz. As a result, the premium for the fuel oil used in commercial shipping on the spot market has reached almost $50 per ton, up from $5.10 per ton in late February, Reuters reported, citing LSEG data.

Over the past couple of days, a fuel shortage developed in the resort city of Bali, Indonesia, due to an oil tanker arriving late in port.

Authorities in Switzerland are releasing jet fuel from their emergency stocks to prevent a fuel shortage caused by drought in the Rhine river valley and train delays in Germany.

The fuel shortage is much worse felt across Subsaharan Africa. In Malawi, the government is short on foreign currency and the rise in oil prices make it difficult to find a cheap and consistent supply of fuel.

South Africa who is undergoing a process of deindustrialization became this year particularly exposed to energy shocks like the one caused by the wars in the Middle East. The country became a net importer of fuel when just as late as 7 years ago it was not. South Africa currently produces about 39% of its fuel demand domestically, including Sasol, which is a significant decrease from 78% in 2019. The country imports approximately 61% of its refined fuel products. South Africa has just 6.9 million barrels left of oil in its petroleum reserve meaning that if oil tankers stop coming, the country will be out of fuel.

In Mozambique, the fuel crisis is preventing many fishermen from going out to sea due to a lack of fuel.

In Kenya, rising fuel prices added a new grievance to the long list of other grievances the people hold against the Kenyan government causing widespread riots earlier this year.

Libya, Sudan, Eritrea and Ethiopia continue to be gripped by localised fuel shortages related to the ongoing conflicts in their respective countries and made worse by the rising oil prices, globally.

@CIG_telegram