Japanese refiners, including Eneos Holdings Inc., have escalated their acquisition of Middle Eastern oil. This surge in demand is a direct consequence of the shutdown of a critical Saudi Arabian pipeline, which has heightened fears regarding immediate supply availability. The move signals a broader effort by Asian refiners to secure crude supplies amidst growing geopolitical instability.
The closure of the Saudi East-West pipeline, damaged by drone attacks, has prompted Saudi Aramco to pivot its oil distribution strategy. Saudi Arabia is now offering more crude oil to Asian refiners via ship-to-ship transfers off Oman's Sohar port, located outside the Strait of Hormuz. This includes flagship Arab Light, Arab Medium, and Arab Heavy grades. Saudi Aramco has sold approximately 20 million barrels to Asian buyers this week for pickup this month and next, with customers including Chinese state-owned and independent processors, as well as other East Asian importers. Loadings from Saudi Arabia's Ras Tanura and Juaymah terminals inside the Gulf have doubled to about two very large crude carriers daily, equating to 4 million barrels.
The broader Middle East conflict, specifically the war in Iran, has severely impacted global oil logistics. The Strait of Hormuz remains largely halted for shipping, forcing Asian refiners to scour the world for alternative crude sources since March 2026. This disruption has led to a record-breaking cost for shipping US crude to Asia. As of Tuesday, hiring a very large crude carrier (VLCC) to transport 2 million barrels from the US Gulf Coast to China cost about $44.8 million, an all-time high. This figure is a sharp increase from $39 million just one day prior and significantly higher than the approximately $17.8 million recorded before the war in Iran began in late February.
Saudi Arabia had previously relied on its East-West pipeline to reroute crude to the Red Sea port of Yanbu for export after the Iran war significantly curtailed shipping through the Strait of Hormuz. However, the recent pipeline shutdown has complicated this strategy. At least one Asian buyer received a notice from Aramco about delays and rescheduling of shipments from Yanbu. Additionally, Saudi Arabia informed European customers that some September-loading crude cargoes would be canceled, and loadings at Yanbu have been suspended.
