Oil traders across Asia expect oil prices to remain elevated as the conflict in the Middle East shows few signs of ending quickly. Fresh attacks on energy infrastructure and commercial shipping have heightened concerns over oil supplies, while strong refining margins are encouraging Asian refiners to compete for crude from alternative sources.
Brent Crude Oil Surges Above $100 a Barrel
Brent crude prices rose above $100 a barrel last week and gained further momentum following attacks in the Middle East, including an assault on key oil infrastructure in Saudi Arabia and commercial shipping.
Supply concerns have also pushed up prices in the physical market. Premiums for Dubai and Oman crude, key benchmarks for Asia, reached their highest levels since March, reflecting intense competition for available cargoes. Premiums for crude from West Africa, the United States and Latin America also climbed to multi-month highs as Asian refiners sought alternatives to disrupted Middle Eastern supplies.
Asian Refiners Pay More for Alternative Crude
Market sources said South Korea’s SK Energy bought 4 million barrels of U.S. WTI crude for December delivery at a premium of around $24 a barrel over November ICE Brent.
GS Caltex also purchased 2 million barrels of U.S. crude at a similar premium over November Dubai crude, with the cargo delivered to its destination.
The deals highlight the sharply higher cost of securing alternative crude for Asian refiners as competition for available supplies intensifies.
China’s independent refiners are also searching for alternative supplies as Iranian and Russian oil flows decline. Market sources said Shenchi Petrochemical bought al-Shaheen crude at a premium of around $23 a barrel over Dubai quotations, on a delivered basis.
The purchases underline growing tightness in the physical crude market, with Asian buyers increasingly turning to supplies from the United States and South America.
Strait of Hormuz Remains a Major Supply Risk
Uncertainty surrounding the Strait of Hormuz remains a major concern for the global oil market. The waterway is one of the world’s most important routes for transporting crude oil and natural gas.
Market participants at the APPEC conference estimated current oil flows through the strait at roughly 6 million to 10 million barrels per day, although tracking tanker movements has become more difficult as some vessels have switched off their identification systems.
Before the war, around 20 million barrels of oil per day passed through the Strait of Hormuz, accounting for a significant share of global energy trade. Any prolonged disruption could therefore have a major impact on crude supplies and prices.
Strong Refining Margins Support Asian Oil Demand
Several Asian refineries are operating at high utilization rates as strong margins for refined products and petrochemicals support profitability.
Robust refining margins are encouraging refiners to continue buying crude despite higher feedstock costs. This is adding to competition for alternative grades and pushing physical oil premiums higher.
Oil Price Outlook for 2026-2027 Remains Uncertain
The outlook for oil prices will depend largely on the duration of the Middle East conflict and the speed at which crude flows through the Strait of Hormuz recover.
S&P Global’s latest outlook puts the forward price of Brent at around $89 a barrel at the end of 2026 and approximately $86 a barrel at the end of 2027 under its base-case scenario.
Wood Mackenzie has said that a full recovery in crude flows through the Strait of Hormuz could eventually push the oil market back into oversupply, potentially putting Brent prices under pressure toward the $50-$60 a barrel range over the longer term.
Brent prices recently fell on September 16-17 after Saudi Arabia increased crude exports through Oman, easing some concerns over supply disruptions. Brent traded around $104-$106 a barrel during the period.
However, geopolitical risks and uncertainty over major shipping routes remain key sources of price volatility.
For Asian oil traders, competition for crude from the United States, South America and other producing regions is likely to remain strong until Middle Eastern supplies and shipments through the Strait of Hormuz return to normal.
Source :
www.reuters.com
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