Burning Bright: How Saudi Crude and HSFO Fuel Near-Term Energy Plays

The global energy transition is moving slower than expected, and investors seeking high-conviction opportunities would be wise to look east. Saudi Arabia's crude exports and the surging demand for high-sulfur fuel oil (HSFO) are creating a rare confluence of near-term supply dynamics and geopolitical tailwinds. With summer heat intensifying and OPEC+ production cuts unwinding strategically, this is a moment to bet on the commodities powering the world's energy grid—even as the world tries to move away from them.

The Saudi Export Play: Asia's Insatiable Appetite

Saudi Arabia's crude exports to Asia have solidified its role as the region's energy linchpin. Despite a 3.2% year-on-year decline in Q2 2025, exports to Japan and South Korea surged by 3.4% and 7.2%, respectively. China, though slightly reduced (-2.9%), remains the top buyer at 24.3% of total shipments. The Strait of Hormuz, through which 20% of global crude flows, is now averaging 7.18 million barrels per day (b/d)—a near two-year high—thanks to OPEC+ quota hikes and Middle East Gulf port loadings up 24% week-on-week in June.

The key data point here is the regional pricing power. reveal a narrowing discount as Asian buyers prioritize reliability over cost in a tense geopolitical landscape. For investors, this points to Saudi Aramco (NYSE: ARAMCO) as the primary beneficiary, with its stock rallying 14% YTD on volume-driven revenue growth.

HSFO: The Relentless Demand Machine

HSFO's resurgence defies every ESG narrative. Despite IMO 2020 sulfur caps, global HSFO demand hit a six-year high in Q2 2025. The catalysts? Scrubber-equipped ships (now 5,000 vessels) and Middle Eastern power plants burning 450,000 b/d of HSFO during summer peaks. The fuel's $8–$12/MMBtu advantage over LNG makes it irreplaceable for utilities in Saudi Arabia, where temperatures hit 45°C.

Crucially, the energy transition is delaying its arrival. Saudi Arabia's Vision 2030 renewables goals face infrastructure bottlenecks—the Jafurah gas field won't displace crude until 2027, and solar/wind projects lag behind targets. This means HSFO consumption will remain elevated through 2025, with Saudi crude burn projected to hit 814,000 b/d during summer.

The HSFO trade is a refinery play. shows the spread narrowing to -$4.25/barrel in Q2—a signal of tight physical markets. Investors should target refiners like PBF Energy (PBF) or Independent Energy Partners (INDE), which prioritize HSFO production.

Risks and the Geopolitical Edge

The risks are clear: open-loop scrubber bans, EU ETS penalties, and LNG price collapses. Yet, short-term margins are too strong to ignore. HSFO's $12.50/barrel crack spread in Europe and Singapore's backwardation signal a market in scarcity. Meanwhile, the Israel-Iran conflict keeps Hormuz traffic volatile— correlate strongly, offering a tactical hedge.

The Investment Thesis: Short-Term Winners

• Crude Exporters: Bet on Saudi Aramco's volume growth and geopolitical premium.
• HSFO Refiners: PBF Energy and INDE have margins widening as HSFO demand outstrips supply.
• Shipping Scrubbers: Companies like Seaspan (SSW), with scrubber-equipped fleets, profit from HSFO's cost advantage.

Avoid long-dated bets on renewables here—the delays are structural. Focus on physical HSFO futures contracts (e.g., NYMEX fuel oil) and OPEC+ producers' equities.

Conclusion: Burning Time

The energy transition is a marathon, not a sprint. In 2025, HSFO and Saudi crude remain the fuels keeping industries running—and investors can profit from this inertia. With HSFO cracks near six-year highs and Asian demand unshaken, this is a rare moment to lean into the very commodities the world is trying to leave behind.

The data doesn't lie: the next 18 months are golden for those who dare to burn.

Disclosure: This article is for informational purposes only and does not constitute financial advice. Always consult a licensed professional before making investment decisions.