Asian refineries are cooling spot purchases, while several Middle Eastern countries are ramping up production to restore existing supply chains.
2026-06-26 10:05:33
The international crude oil market has recently undergone significant adjustments, with major shifts in the procurement strategies of Asian refiners. This, coupled with the concentrated efforts of several Middle Eastern countries to increase crude oil production and the phased adjustments in US and Iranian energy policies, has completely reshaped the regional crude oil supply and demand structure.
The previously heated spot purchase of Middle Eastern crude oil has suddenly cooled down, while Middle Eastern oil-producing countries are making every effort to release production capacity in an attempt to repair the global crude oil supply system. Geopolitical shipping, costs, inventory and other factors have jointly dominated this round of market changes.
After three weeks of concentrated procurement, major Asian refiners have proactively reduced their spot purchases of Middle Eastern crude oil for shipment this month and next month, with previously hot orders for crude oil from the UAE, Saudi Arabia, and Iraq decreasing significantly.
This round of purchasing spree began at the beginning of the month, with Asian markets buying millions of barrels of Abu Dhabi crude oil. However, due to multiple negative factors, the pace of market purchases slowed rapidly. The continued uncertainty surrounding navigation through the Strait of Hormuz, coupled with persistently high international tanker freight rates, has significantly increased the overall cost of importing Middle Eastern crude oil, completely dampening the enthusiasm of Asian buyers to continue stockpiling.
After four months of continuous stockpiling, Asian refineries have secured sufficient supplies of non-Middle Eastern crude oil, which will arrive in batches over the next two months, effectively supplementing their summer production oil demand . Currently, most Asian refineries have completed all their crude oil cargo orders for June and July and have no urgent need to purchase Middle Eastern spot crude oil.
Market traders say that only significant price concessions from Middle Eastern oil-producing countries can attract Asian buyers again at this stage. However , the Strait of Hormuz is currently a high-risk shipping area, and high ship insurance costs and shipping costs completely offset the profit margins brought by discounted crude oil, rendering the price-cutting promotion model ineffective. Meanwhile, the shortage of tanker resources and rising freight rates have made stockpiling oil at sea unprofitable, further weakening market demand.
Influenced by the implementation of the US-Iran memorandum of understanding, the market is generally optimistic about the supply recovery in the core oil-producing regions of the Middle East, and the price of benchmark crude oil in the Middle East has fallen sharply recently. Previously, the spot premium of Dubai crude oil, Murban crude oil, and Oman crude oil relative to swap contracts has completely reversed and turned into a spot discount, creating cross-regional arbitrage opportunities, and a large amount of Middle Eastern crude oil has begun to circulate in the European and American markets.
Meanwhile, Asian markets are taking a wait-and-see approach, hoping for continued progress in US-Iran negotiations and a steady recovery in tanker traffic through the Strait of Hormuz, which would lead to a restoration of crude oil supply under long-term Middle East contracts and a reduction in import prices.
To make up for the previous supply gap, major oil-producing countries in the Middle East, including the UAE, Iraq, Kuwait, Saudi Arabia, and Iran, have launched production increase plans to boost crude oil production capacity and export volume.
Sheikh Nawaf Saud Al-Sabah, deputy chairman and CEO of Kuwait Petroleum Corporation, said that with the gradual resumption of shipping in the Strait of Hormuz, Kuwait is expected to increase its daily crude oil production from 573,000 barrels per day in May to 2 million barrels per day within a week.
The Kuwait News Agency quoted a spokesperson as saying that crude oil production could return to pre-conflict levels within weeks once international commercial shipping at Kuwait's ports fully resumes. Furthermore, Kuwait has reopened its tender for naphtha shipments to Persian Gulf ports after several months, actively working to open up export channels.
As the second-largest oil producer in OPEC, Iraq has been most severely impacted by the disruption of shipping through the Straits of Hormuz. The government plans to restore production capacity in its southern oil fields within two months, increasing daily crude oil production to over 3 million barrels and reversing the previous predicament of shutting down more than half of its production capacity.
Saudi Arabia has adopted a diversified export model, restoring some production capacity while relying on the East-West Pipeline to transport crude oil to Yanbu Port in the Red Sea for export, thus avoiding the risks of shipping through the strait.
The core source of this round of increased supply from the Middle East is Iran. According to the 14-point memorandum of understanding between the US and Iran, the US has granted a temporary waiver of sanctions on Iranian crude oil exports for two months, with the policy expiring on August 21.
Iran has proactively reached out to Asian buyers such as India, South Korea, and Japan to promote its crude oil, as these countries had not imported Iranian crude oil for many years due to long-term US sanctions.
Despite the short-term easing of policies, Asian refineries are extremely cautious in their purchasing. On the one hand, the sanctions exemption period is short and the prospects for US-Iran negotiations are unclear, with the risk of the policy being terminated suddenly. On the other hand, Asian refineries have sufficient inventory in the early stage and have no immediate need to replenish their stocks.
Overall, the current crude oil market is characterized by "cooling demand and expanding supply," and demand for crude oil in Asia and the Middle East is unlikely to recover quickly in the short term. In the long run, to mitigate energy supply risks caused by geopolitical instability in the Middle East, Asian crude oil importing countries will continue to diversify their procurement channels and reduce their dependence on crude oil from a single region. This will also become a long-term trend in global crude oil trade.
The previously heated spot purchase of Middle Eastern crude oil has suddenly cooled down, while Middle Eastern oil-producing countries are making every effort to release production capacity in an attempt to repair the global crude oil supply system. Geopolitical shipping, costs, inventory and other factors have jointly dominated this round of market changes.
Asian refineries cooled their purchasing, and spot demand for crude oil in the Middle East contracted sharply.
After three weeks of concentrated procurement, major Asian refiners have proactively reduced their spot purchases of Middle Eastern crude oil for shipment this month and next month, with previously hot orders for crude oil from the UAE, Saudi Arabia, and Iraq decreasing significantly.
This round of purchasing spree began at the beginning of the month, with Asian markets buying millions of barrels of Abu Dhabi crude oil. However, due to multiple negative factors, the pace of market purchases slowed rapidly. The continued uncertainty surrounding navigation through the Strait of Hormuz, coupled with persistently high international tanker freight rates, has significantly increased the overall cost of importing Middle Eastern crude oil, completely dampening the enthusiasm of Asian buyers to continue stockpiling.
After four months of continuous stockpiling, Asian refineries have secured sufficient supplies of non-Middle Eastern crude oil, which will arrive in batches over the next two months, effectively supplementing their summer production oil demand . Currently, most Asian refineries have completed all their crude oil cargo orders for June and July and have no urgent need to purchase Middle Eastern spot crude oil.
Market traders say that only significant price concessions from Middle Eastern oil-producing countries can attract Asian buyers again at this stage. However , the Strait of Hormuz is currently a high-risk shipping area, and high ship insurance costs and shipping costs completely offset the profit margins brought by discounted crude oil, rendering the price-cutting promotion model ineffective. Meanwhile, the shortage of tanker resources and rising freight rates have made stockpiling oil at sea unprofitable, further weakening market demand.
Oil price structure reversed, US-Iran tensions reshaped market expectations.
Influenced by the implementation of the US-Iran memorandum of understanding, the market is generally optimistic about the supply recovery in the core oil-producing regions of the Middle East, and the price of benchmark crude oil in the Middle East has fallen sharply recently. Previously, the spot premium of Dubai crude oil, Murban crude oil, and Oman crude oil relative to swap contracts has completely reversed and turned into a spot discount, creating cross-regional arbitrage opportunities, and a large amount of Middle Eastern crude oil has begun to circulate in the European and American markets.
Meanwhile, Asian markets are taking a wait-and-see approach, hoping for continued progress in US-Iran negotiations and a steady recovery in tanker traffic through the Strait of Hormuz, which would lead to a restoration of crude oil supply under long-term Middle East contracts and a reduction in import prices.
Several Middle Eastern countries are ramping up production to restore their crude oil export capacity.
To make up for the previous supply gap, major oil-producing countries in the Middle East, including the UAE, Iraq, Kuwait, Saudi Arabia, and Iran, have launched production increase plans to boost crude oil production capacity and export volume.
Sheikh Nawaf Saud Al-Sabah, deputy chairman and CEO of Kuwait Petroleum Corporation, said that with the gradual resumption of shipping in the Strait of Hormuz, Kuwait is expected to increase its daily crude oil production from 573,000 barrels per day in May to 2 million barrels per day within a week.
The Kuwait News Agency quoted a spokesperson as saying that crude oil production could return to pre-conflict levels within weeks once international commercial shipping at Kuwait's ports fully resumes. Furthermore, Kuwait has reopened its tender for naphtha shipments to Persian Gulf ports after several months, actively working to open up export channels.
As the second-largest oil producer in OPEC, Iraq has been most severely impacted by the disruption of shipping through the Straits of Hormuz. The government plans to restore production capacity in its southern oil fields within two months, increasing daily crude oil production to over 3 million barrels and reversing the previous predicament of shutting down more than half of its production capacity.
Saudi Arabia has adopted a diversified export model, restoring some production capacity while relying on the East-West Pipeline to transport crude oil to Yanbu Port in the Red Sea for export, thus avoiding the risks of shipping through the strait.
With the lifting of sanctions on Iranian crude oil, Asian markets remain cautious in their purchasing.
The core source of this round of increased supply from the Middle East is Iran. According to the 14-point memorandum of understanding between the US and Iran, the US has granted a temporary waiver of sanctions on Iranian crude oil exports for two months, with the policy expiring on August 21.
Iran has proactively reached out to Asian buyers such as India, South Korea, and Japan to promote its crude oil, as these countries had not imported Iranian crude oil for many years due to long-term US sanctions.
Despite the short-term easing of policies, Asian refineries are extremely cautious in their purchasing. On the one hand, the sanctions exemption period is short and the prospects for US-Iran negotiations are unclear, with the risk of the policy being terminated suddenly. On the other hand, Asian refineries have sufficient inventory in the early stage and have no immediate need to replenish their stocks.
Summarize
Overall, the current crude oil market is characterized by "cooling demand and expanding supply," and demand for crude oil in Asia and the Middle East is unlikely to recover quickly in the short term. In the long run, to mitigate energy supply risks caused by geopolitical instability in the Middle East, Asian crude oil importing countries will continue to diversify their procurement channels and reduce their dependence on crude oil from a single region. This will also become a long-term trend in global crude oil trade.
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