Global oil markets are experiencing renewed strain following months of conflict, leading weary traders and anxious buyers to gather in Singapore for the Asia Pacific Petroleum Conference (APPEC). Brent crude is threatening to surpass $100 a barrel, and new vessel attacks in the Strait of Hormuz are hindering supply recovery. Diesel markets face extreme tightness, and the outlook for Chinese demand, a critical market factor, remains uncertain. These issues, alongside dwindling oil inventories, the approaching Northern Hemisphere winter, and rising inflation concerns, will be central to discussions at APPEC.
Amrita Sen, founder of Energy Aspects Ltd., highlighted key discussion points, including inventory shortfalls, challenges in diesel markets, Hormuz transits, and ongoing Middle Eastern and Russia-Ukraine conflicts. Singapore is an ideal host, being a major crude-trading hub, refining center, and logistics hub. This year's speakers include Russell Hardy of Vitol Group and representatives from Middle Eastern producers and banks like Goldman Sachs Group Inc. Asian economies, heavily reliant on imports, are particularly vulnerable to these market stresses, especially given Iran's past actions in the Strait of Hormuz and subsequent U.S. blockades.
With Brent above $96 a barrel and freight rates booming, participants at APPEC have diverse perspectives. While international traders, non-Middle East producers, and shippers are enjoying significant profits, Asian buyers face considerable challenges. Sideline discussions will focus on negotiations between Persian Gulf suppliers like Iraq and Saudi Arabia and long-term customers regarding cancellations, costly diversions, and future cargo arrangements. Sen predicts that this year's events could redefine oil-market pricing and relationships, with Hormuz flows unlikely to return to pre-conflict levels.
Market relationships and pricing structures have already shifted, notably with the UAE's exit from OPEC and Abu Dhabi National Oil Co.'s new pricing methodology. China's oil demand, or lack thereof, is also crucial; its reduced purchases early in the war helped prevent prices from staying above $100 a barrel. Warren Patterson of ING Groep NV emphasized China's adaptability as a "swing buyer." The predicament of diesel is a major talking point, with a Russian export ban curbing global flows and Hormuz transits remaining problematic. U.S. retail diesel prices have reached record highs, and Patterson noted that Asia faces a difficult journey to normalize oil supply lines, as Middle Eastern supply has become irrevocably riskier.
An average of 10 commodity ships transited the Strait of Hormuz per day over the past 10 days, the lowest since May, following U.S. and Iranian strikes on tankers. This is a significant reduction given that a fifth of the world's oil supply used to transit through the strait. OPEC+ kept its oil output policy unchanged for October, as new quotas need to be agreed upon before further steps are decided. Analysts from ANZ expect exports to remain constrained through the rest of 2026, with a gradual reopening late in Q4 2026, and a return to pre-war throughput not expected until late Q1 or early Q2 2027.
