Asian refiners remain confident that the Iran-Israel conflict will not disrupt Persian Gulf oil flows

Asian refiners remain optimistic amid rising tensions between Iran and Israel, anticipating that Persian Gulf crude flows to Asia will stay stable despite the ongoing conflict.

Share:

Asian refiners have long developed an immunity to geopolitical tensions in the Middle East. The current conflict between Iran and Israel has so far not caused significant shortages or disruptions in crude supplies to Asia. The security of supply from the Persian Gulf remains crucial, but many key players in Asian refining believe that the escalating tensions will not harm oil flows to the region.

According to feedstock management and trading sources in Thailand, South Korea, Taiwan, Japan, and China, East Asia adopts a largely neutral geopolitical stance. This neutrality deters both Iran and Israel from disrupting trade flows, as such actions could compromise Asia’s geopolitical stability and potentially lead to Asian military intervention.

Perspectives of Asian Refiners

Iran has threatened to retaliate by attacking key Middle Eastern energy infrastructure if the United States or its allies engage militarily in its conflict with Israel, according to a military statement aired on state television on October 1st. However, it is highly unlikely that Israel and Iran will escalate tensions to the point of causing major disruptions in crude supplies to the Far East. Such actions could prompt the intervention of major Asian military powers, jeopardizing the region’s geopolitical neutrality.

An analyst in crude and condensate markets at a Singapore-based integrated Japanese trading company said, “Asia’s top four crude importers [China, India, South Korea, and Japan] are also the region’s four largest economies and rank among the top ten global military and naval powers… This is something that both Iran and Israel are likely well aware of.”

Importance of Middle Eastern Oil in Asia

Middle Eastern sour crudes remain essential staples for East Asia’s refining industry. Diplomatic and military-level interventions from East Asia would be inevitable if the region’s economy were seriously threatened by significant disruptions in oil supplies and trade flows, according to refinery feedstock managers in China, South Korea, and Japan.

A trading and inventory manager at a state-run Chinese refiner said, “If China ever faces any serious oil import flow disruption, I highly doubt Beijing will just sit and do nothing… Very tough measures will be taken, such as military actions.”

Import Strategies and Security

Although China’s crude imports from Saudi Arabia have declined this year due to refiners’ strong preference for cheaper Russian and Iranian barrels—often disguised as “Malaysia-origin” cargoes—Asia’s top crude buyer continues to rely on the Middle East for more than half of its overseas crude procurement. The market share of Middle Eastern crude in China’s total import basket remained at 54% for the January-August period, the latest data from the General Administration of Customs showed.

Refining Operations in Japan

While many international shipping operators and Asian refiners seeking to secure deliveries of west of Suez crude grades largely continue to avoid the Red Sea due to the risk of attacks from Yemen’s Houthi rebels, Japanese refiner Taiyo Oil has indicated that it will continue to lift Saudi Arabian light sour crude from the Red Sea port of Yanbu. Taiyo Oil typically loads Saudi Arabian Super Light crude from Yanbu in the Red Sea and is the only buyer of this grade in Asia, a trading source at the company said.

Adapting to Security Risks

Despite the high security risk, Taiyo Oil is willing to take the chance by using “neutral-flagged” ships to carry the Saudi light sour crude, Taiyo Oil President and CEO Takahiro Yamamoto said on September 9th at the Asia-Pacific Petroleum Conference 2024 organized by S&P Global Commodity Insights. Although Taiyo Oil has diversified its light crude supply sources, particularly in Southeast Asia, and with its strong regional trading partner Petronas, it will not completely cease importing Saudi Super Light crude via the Red Sea maritime route, Yamamoto said.

Japan heavily relies on Middle Eastern crude, being the fourth-largest crude importer in Asia. The country took in 2.19 million barrels per day from Persian Gulf suppliers in the first eight months of the year, accounting for more than 96% of its total crude imports during that period, according to the latest data from the Ministry of Economy, Trade, and Industry.

Assessment of the Oil Market

Platts, part of Commodity Insights, assessed the spread between front-month Platts cash Dubai and same-month Dubai crude swaps at $1.5/b on October 1st, compared to an average spread of $2.02/b in September. The spread is widely known as the Dubai crude market structure and is understood to be a key component in the monthly official selling price calculations of major Middle Eastern producers.

The expansion of the global oil and gas fishing market is accelerating on the back of offshore projects, with annual growth estimated at 5.7% according to The Insight Partners.
The Competition Bureau has required Schlumberger to divest major assets to finalise the acquisition of ChampionX, thereby reducing the risks of market concentration in Canada’s oilfield services sector. —
Saturn Oil & Gas Inc. confirms the acquisition of 1,608,182 common shares for a total amount of USD3.46mn, as part of its public buyback offer in Canada, resulting in a reduction of its free float.
OPEC slightly adjusts its production forecasts for 2025-2026 while projecting stable global demand growth, leaving OPEC+ significant room to increase supply without destabilizing global oil markets.
Talks between European Union member states stall on the adoption of the eighteenth sanctions package targeting Russian oil, due to ongoing disagreements over the proposed price ceiling.
Three new oil fields in Iraqi Kurdistan have been targeted by explosive drones, bringing the number of affected sites in this strategic region to five in one week, according to local authorities.
An explosion at 07:00 at an HKN Energy facility forced ShaMaran Petroleum to shut the Sarsang field while an inquiry determines damage and the impact on regional exports.
The Canadian producer issues USD 237 mn in senior notes at 6.875 % to repay bank debt, repurchase USD 73 mn of 2027 notes and push most of its maturity schedule to 2030.
BP revised upwards its production forecast for the second quarter of 2025, citing stronger-than-expected results from its US shale unit. However, lower oil prices and refinery maintenance shutdowns weighed on overall results.
Belgrade is engaged in complex negotiations with Washington to obtain a fifth extension of sanctions relief for the Serbian oil company NIS, which is majority-owned by Russian groups.
European Union ambassadors are close to reaching an agreement on a new sanctions package aimed at reducing the Russian oil price cap, with measures impacting several energy and financial sectors.
Backbone Infrastructure Nigeria Limited is investing $15bn to develop a 500,000-barrel-per-day oil refinery in Ondo State, a major project aimed at boosting Nigeria’s refining capacity.
The Central Energy Fund’s takeover of the Sapref refinery introduces major financial risks for South Africa, with the facility still offline and no clear restart strategy released so far.
PetroTal Corp. records production growth in the second quarter of 2025, improves its cash position and continues replacing key equipment at its main oil sites in Peru.
An explosion caused by a homemade explosive device in northeastern Colombia has forced Cenit, a subsidiary of Ecopetrol, to temporarily suspend operations on the strategic Caño Limón-Coveñas pipeline, crucial to the country's oil supply.
U.S. legislation eases access to federal lands for oil production, but fluctuations in crude prices may limit concrete impacts on investment and medium-term production, according to industry experts.
Permex Petroleum Corporation has completed a US$2mn fundraising by issuing convertible debentures, aimed at strengthening its cash position, without using intermediaries, and targeting a single institutional investor.
Petróleos de Venezuela S.A. (PDVSA) recorded $17.52bn in export sales in 2024, benefiting from increased volumes due to U.S. licences granted to foreign partners, according to an internal document seen by Reuters.
The detection of zinc in Mars crude extracted off the coast of Louisiana forced the US government to draw on its strategic reserves to support Gulf Coast refineries.
Commissioning of a 1.2-million-ton hydrocracking unit at the TANECO site confirms the industrial expansion of the complex and its ability to diversify refined fuel production.