A fuel crisis could idle 10% of the global shipping fleet, warns Mercuria's Larry Johnson, as refiners shift focus to higher-margin fuels.
The shipping industry faces a looming fuel crisis that could paralyze up to 10 per cent of the global fleet within months, according to Larry Johnson, head of freight at Mercuria, who spoke to London's S&P Global.
Speaking to London's S&P Global, Mr. Johnson stated that refiners are diverting feedstocks away from marine fuel to capture higher margins from diesel and jet fuel, leaving the shipping sector exposed to regional stock-outs by July and potential outages in major hubs by August or September.
Unlike other sectors, shipping lacks state reserves to cushion against supply shocks. A steeply backwardated market has encouraged suppliers to liquidate inventories, draining stocks in Singapore, Northwest Europe, and Fujairah. Singapore has tapped European and Russian supplies to slow losses, but inventories remain near one-year lows.
He warned that once marine fuel runs out, ships will be forced to compete with other sectors for diesel, which already trades at a premium. The industry consumed about 3.3 million barrels per day of residual fuels and 870,000 barrels per day of marine gasoil in 2025, which is equal to almost five per cent of global oil product demand.
Prices for 0.5 per cent sulphur fuel oil nearly doubled in the first three weeks of the war, lifting the Platts bunkerworld index to a four-year high of $1022 per tonne before easing to $830. Confidence in future availability is faltering as shortages deepen.
Mr. Johnson indicated that prolonged disruptions could trigger congestion on the scale of the Covid-19 pandemic, potentially shutting down as much as 10 per cent of marine traffic. Lower-margin sectors such as dry bulk would be hit hardest, with knock-on effects for agriculture and freight rates.
Platts assessed its Global Dirty Tanker Index at a record $221,000 per day in March, but rates have since halved. With 15 million barrels per day of Middle East exports still off the market, Johnson noted that tanker rates will fall further if closures persist.
He added that Iranian tolling has skewed Hormuz transits towards Iran-linked tankers, disadvantaging Western traders. The rise of shadow fleets from Iran, Russia, and Venezuela has complicated sanctions enforcement, with the sanctioned fleet nearing the size of the non-sanctioned fleet.
Brent crude was assessed at $97 per barrel on June 2, down from a record $144 in April, as hopes for a peace deal between Israel and Iran tempered expectations despite ongoing attacks.
