Singaporean refiner Aster Chemicals and Energy Pte is actively procuring crude oil from distant regions such as Latin America and West Africa. This shift in sourcing strategy is a direct response to the curtailment of Middle Eastern supplies, which have been significantly impacted by the ongoing Iran war. Han Lih Kwong, managing director of Aster's refinery and chemical assets, noted that while the company has processed these grades before, the current quantities are unprecedented.
The disruption in Middle Eastern crude flows, particularly through the Strait of Hormuz, has been substantial. Reuters reported that oil flows through the strait have plummeted to below 2 million barrels per day, a sharp decline from normal levels of 8 million to 9 million barrels per day. This significant reduction in global oil supply has contributed to a surge in crude prices, with Brent crude surpassing $100 a barrel as of September 9.
Aster's decision highlights a broader trend of refiners diversifying their crude sources to mitigate risks associated with regional conflicts and supply chain vulnerabilities. While Latin American and West African crude involve longer shipping distances and potentially higher transportation costs, the reliability of supply from these regions is currently outweighing the geographical advantage of the Middle East. This strategic pivot could lead to increased tanker demand and shipping costs, and may result in the crude itself becoming more expensive by the time it reaches Asian markets. However, refiners like Aster are willing to absorb these costs to ensure operational continuity and reduce dependence on volatile Middle Eastern supplies.
This shift by Aster, a major player in Singapore's refining and fuel trading hub, could influence wider changes in the Asian oil market. The long-term implications may include refiners maintaining stronger relationships with suppliers in Africa and Latin America even if Middle Eastern shipments stabilize, fundamentally altering how Asian refiners manage oil supply risks.
