Singapore bunker fuel prices have surged dramatically through July. Very Low Sulfur Fuel Oil (VLSFO) reached $869/mt on July 26, up roughly $240/mt from the early-July low of $625/mt on July 7. High Sulfur Fuel Oil (HSFO) 380 centistoke hit $635/mt, gaining about $190/mt from its July 2 low of $446/mt. The scale of the move is exceptional: between July 17 and July 23 alone, VLSFO gained $78/mt and HSFO gained $58/mt. Similar firming was seen across East-of-Suez hubs including Fujairah and Zhoushan.
Three compounding factors are driving the surge. First, Middle East export refineries — major suppliers of residual fuel to the Asian bunkering market — remain offline following the Gulf conflict. These refineries have not restarted loading, removing a significant source of both VLSFO and HSFO supply. The IEA's July 2026 Oil Market Report identifies this as a key source of refined product tightness globally.
Second, global refinery margins are at four-year highs. Broad 3-2-1 crack spreads in the US hit $64-70/bbl in early to mid-July, well above historical norms. This incentivizes refiners to maximize gasoline and diesel yields, reducing residual fuel oil production. When refinery margins are this elevated, every barrel of crude processed is optimized for higher-value products, and fuel oil becomes a constrained byproduct rather than a targeted output.
Third, Russia's ban on diesel exports effective July 8 has tightened middle-distillate markets globally, pulling refinery capacity and crude runs toward meeting diesel demand and away from residual fuel production. The ban removed roughly 11% of global diesel export supply, and the ripple effects through refinery economics are directly tightening bunker fuel availability.
The Hi-5 spread — the price difference between VLSFO and HSFO — has widened to roughly $230/mt, using the July 26 assessments of $869 versus $635. This is significantly wider than 2025 lows when Argus reported spreads in the $40-100/mt range. For procurement teams, a wide Hi-5 spread restores strong economics for scrubber-equipped vessels. A ship burning HSFO at $635/mt saves approximately $234/mt compared to VLSFO. Even accounting for the capital cost of scrubber installation, payback periods shorten dramatically at current spreads.
Marine bunker demand has been relatively resilient through the broader oil demand downturn. The IEA projects global oil demand contracting by roughly 1.0-1.1 mb/d in 2026, driven by high prices and supply disruptions in Asia and non-OECD markets. But Singapore bunkering volumes — a proxy for global marine fuel demand — have held comparatively steady. Market research projects modest positive volume growth of roughly 3-5% CAGR for bunker fuels through 2034-35, driven by seaborne trade growth and the longevity of the existing fleet.
Supply-side reshuffling is ongoing. Russian fuel oil exports to Asia slowed in early 2026 amid tighter Western sanctions and refinery damage from Ukrainian strikes. January 2026 flows to Asia were approximately 1.2 Mt (about 246 kb/d) and declining. While Asia's imports of Russian fuel oil hit a record in March, helping to offset lost Middle East supply after the Hormuz disruption, analysts said this was insufficient to fully replace the volumes. The net effect: global fuel oil supply to bunkering is being reshuffled from the Middle East to Russia and other exporters, but overall availability is tighter and logistics-risk-driven.
The outlook through H2 2026 points to continued elevated and volatile bunker prices. The IEA and EIA expect tight refined product balances through at least late 2026 because Middle East and Russian disruptions are structural, not temporary. High refinery cracks mean fuel oil will remain a constrained byproduct. For the medium term, high costs of low-carbon alternatives and the slow regulatory transition under CII and FuelEU mean VLSFO and HSFO will remain the dominant marine fuels through the decade. The delay of global IMO carbon pricing proposals further supports this view.
For procurement teams managing marine fuel or bunker contracts, the July surge creates immediate cost pressure and strategic questions. First, the wide Hi-5 spread (~$230/mt) makes scrubber economics extremely favorable. If your fleet has scrubber-capable vessels currently burning VLSFO, immediate switching to HSFO saves approximately $234/mt. For operators without scrubber capacity considering retrofits, payback periods at current spreads are under 12 months for most vessel classes — this is the strongest economic signal for scrubber investment since IMO 2020. Second, forward hedging for Q4 2026-Q1 2027 should account for the structural nature of the current tightness. Middle East refinery restarts are not imminent. Russian product supply constraints are likely to persist through the Ukrainian conflict. Third, consider tactical fuel switching where possible: ships calling at East-of-Suez ports (Singapore, Fujairah, Zhoushan) face the tightest markets, so procuring bunkers at alternative hubs or adjusting voyage timing to avoid peak pricing days can yield meaningful savings. Fourth, monitor the Middle East export refinery restart timeline closely — any resumption of Saudi, Kuwaiti, or Iraqi refinery exports would provide the most direct relief to the current tightness. Until that happens, plan for VLSFO in the $800-900/mt range and HSFO in the $600-700/mt range as the new baseline.