Asian Refiners Struggle with Output As Mideast Supplies 60% of Asia's Oil
By Reuters | 04 Mar, 2026

Asia, the world's biggest oil consuming region, relies on high volume of shipments from the Mideast, most of which must transit the Strait of Hormuz.

Asian refiners dependent on Middle East crude are expected to cut output soon because they are unable to get prompt replacement cargoes after the U.S.-Iran war brought shipping in the Gulf to a standstill, four traders and three analysts said.

Shipping through the Strait of Hormuz between Iran and Oman, which carries around one-fifth of oil used globally, has ground to a near-halt after some ships in the area were hit in Iranian attacks.

The disruptions highlight the risks to Asia, the world's biggest oil consuming region, which sources 60% of its oil from Middle Eastern producers.

Alternative supplies could come from Brazil, West Africa and the U.S., but such shipments typically take more than a month to arrive in Asia and soaring freight rates have made such voyages more costly, traders said. Supply from within the region is limited as production has fallen over the years.

NOT MANY VIABLE ALTERNATIVES

"For refiners in Asia, there aren't many viable prompt alternatives available, while crudes from the West might make sense only if the disruption to flows is prolonged, given their long voyage time," said Samuel Kong, a senior oil analyst at consultancy FGE NexantECA.

There were few offers for oil from Brazil and West Africa as suppliers shied away from high freight rates and a lack of market direction, two traders said.

Offers of Brazilian light crude delivered to China were scarce and have surged to $13 to $14 per barrel above ICE Brent, compared to a premium of $2 to $3 before the conflict, two other traders said.

Prompt Middle Eastern grades delivered to China were also offered at similar premiums, sharply higher than pre-war levels, they added.

U.S. ARBITRAGE OPENS

U.S. crude is another option as the arbitrage to Asia has opened although supply is limited, traders said.

Also, the rate for a Very Large Crude Carrier to ship 2 million barrels of crude from the U.S. Gulf Coast to China jumped to $22.5 million on Tuesday, 30% more than on Friday.

Japan's second-largest refiner Idemitsu Kosan on Monday bought two million barrels of West Texas Intermediate crude from SK Energy for June arrival, two traders said.

Idemitsu and SK Energy did not immediately respond to requests for comment. 

Indonesia will increase U.S. crude imports to replace some supply from the Middle East, its energy minister said on Tuesday.

Indian refiners — among the most exposed to Gulf supply disruptions — will look at all options, including Russian oil if New Delhi approves, should the crisis continue for more than 10 to 15 days, sources at two companies have said.

RUN CUTS

"Run cuts will be necessary to maintain refining runs for as long as it takes before stocks run off or if the oil is flowing again from the Strait of Hormuz," said June Goh, a senior analyst at Sparta Commodities. Typically, refineries can reduce intake by 20% to 30% from nameplate capacity, she added.

Two other analysts said they expect a 5% to 20% run cut for Asian refiners heavily dependent on Middle East supply.

Chinese refiners Zhejiang Petrochemical Corp and Fujian Refining and Petrochemical Co have already begun run cuts.

(Reporting by Siyi Liu in Singapore; Editing by Florence Tan and Kate Mayberry)