Asian refineries are "snatching up" oil a month in advance! Persian Gulf crude oil spot premiums surge to $38/barrel.

Japan's two major refiners broke with their usual purchasing patterns, locking in Middle Eastern crude oil shipments a month in advance, pushing the Persian Gulf spot premium to $38 per barrel.

Eneos Holdings and Idemitsu Kosan recently purchased Omani crude oil for shipment as early as October. Typically, Persian Gulf cargoes purchased in September don't load until November, making this purchase a full month earlier. The two 2 million barrel cargoes were sold at $38 per barrel above the Dubai benchmark, with sellers including trading houses and oil giants. Both companies declined to comment.

Domestic refineries Shandong Dongming Petrochemical and Shenghong Group recently purchased Middle Eastern crude oil for delivery in October and November, while India's state-owned oil company also reserved cargoes for October loading in a tender. This concentrated release of Asian demand has driven a significant increase in the spot premium for Persian Gulf crude oil.

Behind the buying spree is the closure of Saudi Arabia's east-west oil pipeline after it was attacked last week. This pipeline, with a daily capacity of about 7 million barrels, is a key alternative route to bypass the Strait of Hormuz. The closure has created a potential shortfall of about 4 million barrels per day, or about 4% of global supply, and Saudi Aramco has postponed deliveries to some European customers.

Pre-order a month in advance, breaking the usual purchasing calendar

Eneos Holdings and Idemitsu Kosan purchased Omani crude oil for shipment as early as October, a full month earlier than the Persian Gulf cargoes they bought in September, which typically don't ship until November. Both companies declined to comment.

This shift is not isolated. Last week's attacks forced Saudi Arabia to shut down the east-west oil pipeline, a 1,200-kilometer-long pipeline traversing the Arabian Peninsula and a crucial alternative route to Yanbu port on the Red Sea, bypassing the Strait of Hormuz. With the pipeline closed, Yanbu port's inventory can only sustain export demand for five to seven days, and repair time is estimated to range from several days to five or six weeks.

Two lots of 2 million barrels each of Omani crude oil were sold at a premium of $38 per barrel over the Dubai benchmark, a premium far exceeding normal levels, directly reflecting the scarcity premium of the immediate shipment. Sellers included trading houses and oil giants.

Amid supply disruptions, Saudi Arabia redirected oil exports from Yanbu port back to eastern ports, resulting in a 4.5 million barrel per day decrease in Red Sea exports in August compared to July, and a sharp drop in the number of available cargoes for immediate sale. Buyers paid higher premiums in exchange for certainty regarding the timing of shipments.

For Japanese refiners, the simultaneous entry of Asian buyers into the spot market forces them to secure cargoes at higher premiums, thus increasing procurement costs. If the Persian Gulf premium remains high, the practice of Asian buyers locking in cargoes in advance may evolve from isolated cases into a trend. Going forward, attention should be paid to the progress of the repairs to Saudi Arabia's east-west oil pipeline and whether the Persian Gulf spot premium can decline as supply recovers.

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