Core Insights - Fuel oil demand is unexpectedly rising due to a combination of factors including the expansion of a shadow fleet serving Russia and longer shipping routes as vessels avoid the Red Sea [1][2][8] - Many shippers are opting to install scrubbers to continue using high-sulphur fuel oil instead of switching to cleaner alternatives, driven by Western sanctions and shipping disruptions [2][3] - The International Energy Agency (IEA) reports a 4.8% increase in fuel oil demand, reaching an average of 6.5 million barrels per day (bpd) in 2025, contrasting with declines in diesel and jet fuel demand [4][6] Demand Dynamics - Fuel oil markets have shown resilience, with demand driven by strong power generation needs in the Middle East and disruptions in Red Sea shipping due to Houthi attacks [3][4] - Saudi Arabia and Egypt's fuel oil imports increased by 33% year-on-year in 2024 and remain approximately 31% higher in 2025 compared to 2023, influenced by Western sanctions on Russia [7] - The IEA had previously forecasted a modest 1.6% growth in fuel oil demand from 2019 to 2025, but recent trends indicate stronger-than-expected usage in power generation due to hotter summers [6] Supply Considerations - Near-term fuel oil demand may strengthen due to refinery needs, but a looser supply-demand balance is anticipated from November to December as refineries in Saudi Arabia and Brazil return from maintenance [5] - The diversion of shipping routes around the Cape of Good Hope instead of the Suez Canal has increased fuel oil demand by approximately 100,000 bpd, accounting for about 2% of global bunker demand [8]