Asian fuel oil benchmarks slump as Iran war de-escalation hopes grow

what happened

According to Reuters, Asian fuel oil benchmark prices dropped sharply over the week. Traders are pricing in larger crude and fuel flows from the Middle East, while the Democratic takeover of the US Congress eased worries that the conflict with Iran would escalate further. Cheaper residual fuel would lower refuelling costs for shippers and feedstock costs for refineries.

Asian refiners' margins for 380-cst high-sulphur fuel oil (HSFO) slid to a $2.29 per barrel discount on Thursday, from a $5.34 premium at the start of the week, based on LSEG data. That is the weakest level since mid-September. Kpler data showed UAE fuel oil exports to Singapore and Malaysia from Fujairah reached an eight-month high of about 729,000 metric tons in October.

Brent futures settled on Wednesday at their lowest in more than two months. Some traders still expect support from high freight rates, which limit cargo flows from Europe to Asia, and the east-west fuel oil spread hit a record premium at the end of October.

why it matters

The key scenario for markets is diplomacy: if a peace deal materialises, more oil from the Middle East could keep pressure on prices. At the same time, elevated freight continues to restrict supply and may support spot premiums toward year-end.

market impact

Fuel oil and Brent: expectations of more Middle East supply pressure prices lower

• ▼HSFO fuel oil (Asia) pressure down — expected rise in Middle East supply if a peace deal is reached
• ▼Brent pressure down — easing fears of further escalation in the conflict with Iran

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