Global shippers shift bunker buying to spot market as Middle East war reshapes fuel supply

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Shippers bunker market shift

Highlights

Marine fuel prices remain over 70% above pre-war levels, pushing shipowners to favor spot market purchases instead of long-term supply contracts.
Contract durations for bunker fuel have shortened from six to twelve months to as little as one quarter or even one month due to heightened price volatility.
Supply disruptions around the UAE's Fujairah port have increased bunker demand at alternative ports such as Port Louis, Colombo, Salalah, and newly in Gwadar since July.

Shorter contracts gain ground

As reported by Reuters, more than seven months into the conflict with Iran, marine fuel prices remain more than 70% above pre-war levels, based on data from bunker traders. Executives say that volatility is making shipowners less willing to commit to long-term supply contracts at a single port.

Peter Grunwaldt, chief executive officer at Seascale Energy and head of bunkering at tanker company Hafnia, says spot buying is becoming more frequent because owners often purchase only the minimum fuel needed to reach the next port when markets rise sharply. That approach gives shipowners flexibility to decide on each purchase based on daily price movements, rather than lifting fixed volumes under term contracts.

Mikkel Kannegaard, chief operating officer at Bunker Holding, says longer-term contracts are becoming less common as buyers try to avoid being overexposed if prices fall. Choong Zhen Mao, executive director at Equatorial Marine Fuel, says contract durations have shortened to as little as one quarter or even one month, compared with six months or a year before the war.

Alternative ports gain strategic importance

Rerouting and vessel diversions linked to blockades at key Middle East waterways are also changing where ships refuel. Executives say the disruption around the United Arab Emirates' Fujairah port, once one of the leading bunker supply hubs, is encouraging buyers to seek supplies in a broader range of locations.

Grunwaldt says traditional bunkering patterns around the Arabian Gulf are being broken up, with more enquiries flowing to nearby ports. He says ports such as Port Louis in Mauritius, Colombo in Sri Lanka and Salalah in Oman are now being used more often than before, while Kannegaard says demand is also increasing in Africa and South Asia.

Trading groups are also adapting their supply networks. Vitol started bunkering at Pakistan's Gwadar Port in July, creating an option outside the Strait of Hormuz for customers operating in the Gulf region. Kieran Gallagher, Vitol's head of Asia, says diversification is necessary both to handle current disruptions and to build longer-term resilience through broader supply sources and new trade routes for conventional fuels.

In our earlier article on the WTO’s assessment of the Middle East war’s impact on trade, we explained that repeated conflicts and disruptions are pushing companies to redesign supply chains and shipping routes for greater resilience. The WTO warned that these shifts could persist even after tensions ease, as firms increasingly rely on alternative routes and contingency plans despite higher costs.

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