- Asian Crude Arrivals Up 2.4% in July as Refineries Ramp Up Post-Maintenance.
- Wider Arabian Sea Crude Share Falls Despite OPEC+ Export Surge.
- Southeast Asia and U.S. Crude Offset Drop in Arabian Sea Imports.
Crude imports into Asia, excluding China and India, are projected to increase by 2.4% month-on-month in July. This rise is in line with seasonal refinery patterns, as refineries in Northeast and Southeast Asia typically ramp up imports in the third quarter after completing maintenance in the second quarter. Moreover, export-focused refineries are likely running at higher capacities due to strong diesel crack spreads, which are driving up demand, reports Break Wave Advisors.
Wider Arabian Sea Share Declines Despite Higher OPEC+ Exports
Even though overall crude shipments to Asia are on the rise, the share of crude coming from the Wider Arabian Sea is expected to dip by 4 percentage points to 71% in July. This decrease occurs despite an anticipated boost in seaborne crude exports from OPEC+, as the group continues to unwind its production cuts. The reduction in Arabian Sea crude is being balanced out by increased imports from other regions, especially Wider Southeast Asia and the North American East Coast.
Exclusion of Sanctioned Volumes and Imports into China and India
This analysis zeroes in on non-sanctioned crude flows, leaving out volumes from Iran, Venezuela, and Russia. Imports into China and India are also excluded due to their substantial trade with these sanctioned countries. The aim is to provide a clearer picture of the global dynamics surrounding non-sanctioned crude supply to Asia.
Southeast Asia Emerges as a Key Supply Region
Crude shipments from the Wider Southeast Asia region have been steadily increasing through June and July. This rise follows heightened geopolitical tensions in June, particularly the intensification of the Israel-Iran conflict, which sparked concerns about potential supply disruptions in the Strait of Hormuz. To manage this risk, many Asian buyers have diversified their supply sources by increasing spot purchases from Southeast Asia. Notably, crude imports from Australia saw a significant jump in June, followed by a sharp increase in Malaysian barrels in July.
Outlook for August: Arabian Sea Flows to Rebound
Looking ahead, we can expect crude flows from Asia to ease up a bit in August. With tensions between Israel and Iran cooling off, worries about disruptions in the Strait of Hormuz have eased, leading Asian buyers to shift their focus back to sourcing from the Wider Arabian Sea. Plus, OPEC-8 members are gearing up to boost their seaborne crude exports this month as part of their planned output increases. All of this should help reduce the reliance on Southeast Asian crude in the short term.
Shift in U.S. Crude Flows: More to Europe, Less to Asia
In July, crude shipments from the North America East Coast to Asia saw a rebound, thanks to a surge in U.S. exports to South Korea, Taiwan, and Japan back in May. However, this trend is likely to take a turn, as U.S. crude exports to Asia dropped month-on-month in June. More barrels are now being sent to Europe, where refineries are ramping up their crude processing to meet the high demand for fuel for road transport and power generation during the summer months.
As a result, we can expect U.S. crude arrivals in Asia to decline in August. This downward trend may continue into September, influenced by quality issues with Mars crude and a decrease in surplus barrels. The usual 50-day journey from the U.S. Gulf Coast to Northeast Asia also plays a role in affecting near-term arrivals.
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Source: Break Wave Advisors
