Geopolitical tensions have led to a significant contraction in Asian crude oil imports, while regional refineries have been forced to adjust their procurement structures, shifting heavily towards light crude oil feedstocks. These combined factors have resulted in a continued decline in overall Asian refining capacity, with a marked decrease in the production capacity of core middle distillate fuels such as diesel and jet fuel. This tightening of regional fuel supply will provide strong support for refined oil product prices.

I. Imports shrunk sharply, putting continued pressure on Asian refinery operating rates.

Statistics released by shipping data agency Kpler show that Asian crude oil imports fell sharply year-on-year in April, with a drop of 22%, and the average daily import volume fell to 20.4 million barrels, the lowest level in ten years since 2016.



For a long time, Asia’s refining industry has been highly dependent on crude oil supply from the Middle East. The region’s total refining output accounts for more than 30% of the global total. Fluctuations in the supply of crude oil from the Middle East directly impact overall refining capacity.

Geopolitical tensions have disrupted shipping routes, and even though Asian refineries are actively buying up unconventional imported crude oil at high prices, it is still difficult to fill the supply gap.

Data from the International Energy Agency indicates that crude oil processing volumes at Asian refineries declined significantly in March, and refining capacity is expected to continue to fall in April and May. Several authoritative energy consulting firms also predict that Asian refinery operating rates will remain low in the short term, and industry production cuts are a foregone conclusion.

Affected by the overall environment, major refining economies in Asia have all experienced capacity contraction. As the world's largest oil refining nation, Asia's largest oil producer has proactively reduced its fuel exports to prioritize domestic energy supply, resulting in a significant decline in refining volumes compared to the previous period. Refinery capacity utilization rates in Japan and South Korea, two major refining powers, have fallen sharply below normal levels. Singapore's energy hub refineries are operating at low capacity, and India's refining capacity has also seen a significant year-on-year decline, with the scope of regional production cuts continuing to expand.

II. Raw material structure restructuring, with light crude oil becoming the mainstream purchase.

Medium-quality, high-sulfur crude oil from the Middle East is the most suitable core feedstock for most Asian refineries, maximizing the output of refined petroleum products. Due to shipping restrictions, a large volume of Middle Eastern crude oil cannot be transported to the Asian market, creating a significant supply gap. To compensate for this shortage, regional refineries have begun adjusting their global procurement strategies, increasing their purchases of crude oil from the United States, Africa, Kazakhstan, and other regions.

The shift in raw material procurement has directly driven the trend towards lighter crude oil grades in Asia. Data from relevant energy agencies shows that the proportion of light, low-sulfur crude oil purchased in Asia reached a record high in April, more than doubling compared to February. This type of light crude oil has unique refining characteristics, making it more suitable for the production of gasoline, naphtha, and other products, and its refining output structure differs significantly from that of traditional Middle Eastern crude oil.

III. Imbalance in refining and chemical output leads to a widening supply gap for diesel and jet fuel.

The fundamental shift in crude oil categories has directly disrupted Asia's existing refined oil production structure. Conventional Middle Eastern crude oil refining yields a high proportion of middle distillate, ensuring a stable supply of diesel and jet fuel. However, the newly added light crude oil has a significantly lower yield of middle distillate, directly reducing the production capacity of these two essential fuels.

Industry analysts estimate that within Asia's vast refining system, a decline in feedstock yield alone could create a fuel shortage of hundreds of thousands of barrels per day. Coupled with factors such as export controls in various countries and voluntary production cuts by refineries, the short-term reduction in daily diesel and jet fuel supply in Asia could reach at least 1 million barrels. Industry expert Sumit Ritolia further estimates that the overall supply loss of middle distillates in Asia in April would be even greater, with diesel shortages being the most prominent.

IV. Market Outlook

Industry experts generally believe that April will be the peak of Asian refining production cuts, and the supply gap in Middle Eastern crude oil will be difficult to fill in the short term, with time lags in the transportation and delivery of alternative feedstocks. The market generally anticipates that regional refining capacity will gradually recover in June, but the overall pace of recovery will depend entirely on the easing of geopolitical tensions and the stable operation of key shipping lanes.

Overall , the sharp decline in crude oil imports and the shift in raw material structure are reshaping the energy supply and demand landscape in Asia. Against the backdrop of escalating geopolitical risks, the tight supply of diesel and jet fuel is unlikely to ease in the short term, which will continue to support stronger refined oil prices. At the same time, it will force Asian refineries to optimize their crude oil procurement systems in the long term, enhancing the diversification of their energy supply and their resilience to risks.