Fuel Shortages at Zhoushan Hub Drive Price Spikes

Ships at the Port of Ningbo-Zhoushan are experiencing refueling delays of one to two weeks, a sharp increase from the typical one to two day window. This supply squeeze has pushed spot prices for very low-sulfur bunker fuel to their highest levels since March, with costs currently more than 25% higher than those in Singapore.

The shortage stems from crude import constraints caused by the US-Iran war and a strategic decision by Chinese refiners to prioritize the production of higher-margin gasoline and diesel. This shift reduced the output of residual bunker fuel, contributing to a 13% drop in low-sulfur fuel oil production by state-owned refiners in August.

These market conditions persist despite efforts by the Government of China to establish Zhoushan as a regional rival to Singapore through the implementation of fuel oil tax rebates. Analysts expect the tightness to ease in early October, driven by a seasonal decline in demand and a national holiday that will slow port activity.