South Korean and Thai refiners have shown reluctance to regularly import CPC Blend crude from the Mediterranean due to concerns about shipping security in the Red Sea following the Israel-Hamas ceasefire, according to S&P.
Security Risks
Despite the recent Gaza ceasefire, Iranian-backed Houthi militants have stated they will only target vessels with strong links to Israel.
However, many Asian crude buyers remain concerned about the security risks associated with tanker voyages through the Red Sea. Shipping insurance costs remain elevated.
An official at SK Innovation, South Korea’s top refiner, expressed concerns regarding the safety of tanker voyages through the Red Sea. He emphasized that there is no guarantee of safe passage for vessels carrying crude oil from the Mediterranean to Asia.
As a result, CPC Blend crude, along with other Mediterranean crude grades, is likely to continue being transported via the longer and more expensive Cape of Good Hope route. CPC Blend crude, originating from Kazakhstan, is transported via the 1,500 km Tengiz-Black Sea pipeline to the Russian Black Sea port of Novorossiisk. Before the recent escalation of tensions in the Middle East, this crude typically traveled through various maritime routes, including the Black Sea, Mediterranean Sea, Suez Canal, Red Sea, Indian Ocean, and South China Sea, to reach North and Southeast Asian ports.
South Korea’s imports of CPC Blend crude have significantly declined over the past year. Due to unattractive cracking economics and high logistical costs associated with the current geopolitical situation, the SK Innovation official indicated that CPC Blend is unlikely to be a significant component of the company’s future feedstock procurement plans.
Thai Imports
Thailand’s imports of CPC Blend crude were minimal in 2023, with only 1,805 b/d purchased. In 2024, refineries in Southeast Asia’s second-largest oil consumer completely avoided the light sweet Kazakh crude. A feedstock management source at a state-run Thai refiner attributed this to the unattractive economics and high logistical costs associated with CPC Blend.
Platts assessed CPC Blend on a CIF Augusta basis at a discount of $1.955/b to the Dated Brent strip on January 20th. This discount has widened significantly compared to December 2024, when the average discount was 88 cents/b.
Despite the weak demand for CPC Blend, Thailand continues to import light, sweet crude grades from Libya (El Sharara, Mesla Blend, Mellitah condensate) and Azerbaijan (Azeri Light). These crudes typically reach Far Eastern destinations via Suezmax or smaller tankers, traversing the Suez Canal and the Red Sea route.
To mitigate the logistical risks associated with the Red Sea route, Southeast Asian refiners are exploring alternative delivery options. One such option involves co-loading Mediterranean and North African crudes with Nigerian and Angolan crude at West African ports. These combined cargoes would then be transported to the Far East via the longer Cape of Good Hope route.
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Source: S&P Global
