Global Fuel Oil Deficit Projected for 3Q26

Refiners prioritizing higher-margin transport fuels and Middle East shipping disruptions have created a 218,000b/d global fuel oil supply deficit in 3Q26, driving Asian buyers toward Latin American crude. While regional peers like Brazil have expanded exports to Asia to 1.8MMb/d, Mexico remains unable to capture market share due to PEMEX directing crude output toward domestic refining self-sufficiency. Consequently, Mexican participation in Asian supply markets remains constrained to bilateral government requests rather than spot export expansion, affecting trade balances and state revenue.

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A global fuel oil supply deficit for marine shipping and power generation is projected for 3Q26, as refiners prioritize producing diesel, gasoline, and jet fuel. Energy Aspects forecasts a market shortfall of 218,000b/d during this period, marking the first deficit recorded by the consultancy since 3Q25. 

Refiners have shifted output toward higher-margin products as global gasoline and diesel inventories reached multi-year lows, consuming fuel oil as feedstock in secondary refining units to maximize secondary processing runs. 

Geopolitical conflicts and refinery outages in key exporting regions compound the supply squeeze. Middle East fuel oil exports decreased by 45% year-on-year to an average of 447Mb/d between March and August, while Russia's fuel oil exports fell to 591Mb/d in August, down from an average above 860Mb/d in 2025. In Kuwait, the Al-Zour refinery exported a single 26Mb/d cargo since March, compared to an average of 191Mb/d in January and February. Meanwhile, Nigeria's 650Mb/d Dangote refinery expanded its exports of diesel, gasoline, and jet fuel while reducing fuel oil shipments. 

A Reuters report considers that Asia faces the most significant exposure to these disruptions due to its dependence on Middle Eastern supply flows. Singapore, the world's primary bunkering hub, imports over half of its daily consumption of nearly 1MMb. Inventory levels across major storage hubs in Singapore, Amsterdam-Rotterdam-Antwerp, and Fujairah have fallen approximately 30% below three-year seasonal averages. 

Demand for marine fuel has concurrently risen as commercial vessels reroute around the Red Sea and the Bab el-Mandeb Strait to avoid security risks, extending voyage distances. Data from bunker pricing platform ZeroNorth indicates that the price of very low sulphur fuel oil in Singapore reached nearly US$825/t, or US$130/b, as of Sep. 1, 2026, representing a 76% increase since the onset of the Middle East conflict and outstripping a 40% gain in benchmark Brent crude oil. 

OPEC+ Members Hold October Output Steady

Seven OPEC+ participating countries—Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman—agreed to maintain their September 2026 required production levels through October 2026 following a virtual market review meeting on Sept. 6, 2026. The decision leaves required production quotas unchanged, setting Saudi Arabia at 10.47MMb/d, Russia at 9.95MMb/d, Iraq at 4.43MMb/d, Kuwait at 2.7MMb/d, Kazakhstan at 1.63MMb/d, Algeria at 1MMb/d, and Oman at 841Mb/d. The participating nations reaffirmed their collective commitment to full conformity under the Declaration of Cooperation, with monthly market monitoring meetings scheduled to continue ahead of the next session on Oct. 4, 2026.

Mexico Constrained from Capitalizing on Asian Demand

As ongoing Middle East conflicts drive crude prices to US$92.6/b, a 29.1% year-on-year increase, major Asian refiners are actively seeking non-Persian Gulf supplies across Latin America to safeguard fuel security, as reported by MBN. State-owned buyers like China’s Sinopec, which holds 20 days of processing capacity in crude inventory, along with Indian refiners such as Reliance Industries, have expanded procurement from regional producers. Trade data from Kpler indicates that Asian imports of Brazilian crude rose to 1.8MMb/d between January and May 2026, up from 1.2MMb/d in 2025, while Indian refiners expanded imports of Venezuelan heavy crude to over 342,000b/d.

Despite this demand shift toward Latin American barrels, Mexico remains unable to capture a significant share of the Asian spot export market. According to experts from Rice University’s Baker Institute for Public Policy, Mexico’s restrictive regulatory landscape limits large-scale foreign capital entry, while PEMEX directs the vast majority of its crude production toward domestic refining and fuel self-sufficiency. Consequently, Mexican crude sales to Asia have occurred strictly through government-to-government requests rather than market-driven spot expansions.

These targeted arrangements include a 1MMb crude shipment agreed upon between President Claudia Sheinbaum and Japanese Prime Minister Sanae Takaichi for delivery in July 2026, alongside similar requests from South Korea during bilateral talks. President Sheinbaum affirmed that national self-sufficiency remains Mexico's primary energy policy, noting that sales to strategic partners will strictly utilize unrefined surplus crude. Without shifts in federal refining targets or regulatory frameworks, Mexico will remain largely sidelined from the broader spot market expansion in Asia.