Global demand for fuel oil used in ships and power generation is surging beyond previous forecasts, defying decarbonization efforts and International Maritime Organization (IMO) regulations. The unexpected rise is being driven by the growth of the “shadow fleet” transporting sanctioned oil, longer shipping routes as vessels avoid the Red Sea, and increased consumption in the Middle East’s power sector.
Drivers of Rising Fuel Oil Demand
Efforts to phase out high-sulphur fuel oil (HSFO) have been offset by ship operators installing exhaust gas cleaning systems, or scrubbers, which enable them to burn cheaper HSFO while meeting emissions limits. According to Energy Aspects analyst Royston Huan, Red Sea disruptions caused by Houthi attacks and continued strong demand for power generation in the Middle East have made fuel oil markets “remarkably resilient.”
The International Energy Agency (IEA) reports that global fuel oil demand has climbed 4.8% to an average of 6.5 million barrels per day in 2025, compared with 2019. This stands in stark contrast to diesel and jet fuel, which have declined since pre-pandemic levels. Saudi Arabia and Egypt, for instance, have seen fuel oil imports jump over 30% year-on-year, partly due to Saudi Arabia importing discounted Russian supplies to free up more of its own crude for export.
Impact of Red Sea Diversions and Shadow Fleet Expansion
The continuing attacks on vessels in the Red Sea have forced ships to reroute around the Cape of Good Hope, adding thousands of miles to journeys and raising fuel oil consumption by an estimated 100,000 barrels per day, or about 2% of global bunker demand, according to consultancy FGE.
In parallel, Western sanctions on Russia and Iran have led to the growth of a “shadow fleet” of ageing tankers between 1,200 and 1,600 vessels, roughly one-fifth of the global tanker fleet operating outside conventional insurance and regulatory oversight. These ships, often over 15 years old and less fuel-efficient, primarily burn high-sulphur fuel oil, contributing an additional 106,000 barrels per day to global demand.
Scrubbers and Regulatory Uncertainty
Although IMO regulations in 2020 capped sulphur content in marine fuels at 0.5%, scrubber adoption has reversed much of the anticipated decline in HSFO use. By the end of 2024, over 6,000 vessels had installed scrubbers a figure expected to reach 6,523 by year-end, up sharply from 4,348 in 2020, according to DNV.
While the IEA predicts a gradual decline in fuel oil demand to 6.1 million barrels per day by 2030, regulatory resistance particularly from the U.S., where the Trump administration has opposed stricter IMO emissions policies could delay tighter environmental measures. This may extend the lifespan of fuel oil demand well into the late 2020s.
The surge in fuel oil demand underscores the complex interplay between geopolitics, regulatory adaptation, and industry economics. Despite ongoing efforts toward cleaner fuels, global shipping and power generation continue to rely heavily on fuel oil buoyed by the shadow fleet, extended voyage routes, and the widespread use of scrubbers. As long as these factors persist, the global energy transition at sea may progress more slowly than anticipated.
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Source: Reuters
