East Asian refiners are beginning to ramp up fuel exports after months of prioritizing local sales. This move appears to be an effort to get ahead of the market before the Strait of Hormuz fully reopens, which is expected to flood the market with oil.
There has been a noticeable increase in spot offers of distillate cargoes, including diesel and jet fuel, from at least two processors in recent weeks, with South Korean refiners among them. This trend is an extension of increased sales over the past month, driven by high stockpiles in several Asian nations.
The impending reopening of the Strait of Hormuz follows an interim deal between the US and Iran. Approximately 31 supertankers, carrying about 62 million barrels of crude, are currently trapped inside the Persian Gulf and are poised to sail out once the waterway is accessible. This massive influx of oil, which would reach East Asia in about three weeks, is expected to significantly increase supply and potentially lower prices. Asian refiners are already well-supplied for the current and upcoming months, having previously secured alternative crude sources and reduced processing rates due to decreased demand from high fuel prices. The forward curve for benchmark Middle Eastern crudes like Dubai and Murban has already shifted into a bearish contango pattern, and Oman crude is now trading at a discount to its Dubai benchmark, reversing its usual premiums. At least one diesel cargo also recently traded at a discount, contrasting with previous premiums.
