Middle Eastern benchmark distortion? Asian refineries abandon Dubai crude prices, start switching to pricing U.S. crude with Brent.

The historic surge in Middle Eastern benchmark oil prices is reshaping Asia’s crude trade landscape. After Dubai crude set an all-time record of about $170 per barrel, surpassing Brent, Asian refiners have begun switching their U.S. crude pricing benchmark from Dubai to ICE Brent. Meanwhile, the Japanese government has stepped in, requesting domestic wholesalers to follow suit in changing pricing benchmarks to curb further gasoline price increases.

On March 27, Reuters reported, citing three refining and trading sources, that Asian buyers have just begun booking U.S. crude cargoes for July delivery this week, and multiple Japanese refiners have completed Brent-based pricing purchases. At the same time, Japan’s Ministry of Economy, Trade and Industry (METI) issued administrative guidance to domestic wholesalers, requiring them to use Brent as the pricing benchmark for gasoline instead of Dubai.

This series of moves may impact the liquidity of Middle Eastern benchmark oil derivatives markets and further intensify fragmentation in global crude benchmark systems. For Asian buyers highly dependent on Middle Eastern crude supplies, switching pricing benchmarks is not only a stopgap measure against abnormal price volatility, but may also exert long-term pressure on the pricing mechanisms of major suppliers like Saudi Aramco.

Dubai Oil Price Sets Historic Record, Far Surpasses Brent

Dubai crude soared last week to a historic high of $169.75 per barrel, overtaking Brent crude and making Middle Eastern oil the most expensive worldwide.

According to reports, the immediate trigger for the price anomaly was S&P Global Platts excluding three out of five grades of crude related to the Strait of Hormuz in response to anticipated prolonged disruptions to the key shipping route, causing the quantity of tradable crude to drop sharply. Meanwhile, strong demand from French energy giant TotalEnergies also supported Dubai prices.

Currently, Brent crude futures trade at around $103 per barrel, far below the Dubai benchmark. The price spread provides a clear economic incentive for Asian buyers to switch to Brent pricing.

Asian Refiners Accelerate Switching, Saudi Aramco Faces Pressure

According to Reuters, Japanese refiner Taiyo Oil purchased 2 million barrels of U.S. light crude via tender this week for July delivery, priced at ICE Brent plus about $19 per barrel. The company usually uses Dubai prices as the benchmark when buying WTI crude; this switch in benchmark is significant.

The report cites sources saying that other Japanese refiners have also completed U.S. crude purchases based on the Brent benchmark, with transactions reached by private negotiations and details yet undisclosed.

Against a backdrop of extreme market volatility, some Asian refiners have requested Saudi Aramco, the world’s largest crude exporter, to switch its official sales price benchmark from Platts Dubai to ICE Brent.

Japanese Government Makes Rare Move, Administrative Guidance Pushes Benchmark Switching

According to a document seen by Reuters, Japan’s Ministry of Economy, Trade and Industry has requested domestic wholesalers to use Brent as the benchmark when setting gasoline prices. The document states that since Brent prices are lower than Dubai, changing the pricing benchmark will help limit gasoline price increases, and suggests wholesalers continue to use Brent pricing in the future.

Such administrative guidance is not legally binding, but Japanese companies typically comply. This month, Japan’s gasoline prices surpassed 190 yen per liter (about $1.19), setting a new record and forcing the government to launch subsidy measures.

On the supply side, Japan began using private oil stockpiles from March 16 and started tapping national reserves and joint reserves held with three Gulf oil-producing nations on March 26. Japanese Prime Minister Sanae Takaichi also discussed further coordination for releasing oil reserves during a meeting with International Energy Agency Director Fatih Birol in Tokyo this week.

Supply Crisis Spreads Across Asia, Multiple Nations Seek Japanese Support

The document also reveals that the current supply crisis has had a broad impact on Asia, with Vietnam, Indonesia, and India seeking assistance from Japan.

Specifically, Vietnam has requested crude for its Nghi Son refinery, which is jointly owned by Idemitsu Kosan; India is in talks with Inpex for arrangements to exchange LPG for naphtha and crude; Indonesia similarly hopes to purchase LPG from Inpex. Inpex, Japan’s largest refiner and wholesaler Eneos Holdings, and Cosmo Energy Holdings all declined to comment; Idemitsu Kosan has not responded to requests for comment in time.

The Ministry of Economy, Trade and Industry said that due to oil price surges following the outbreak of conflict in the Middle East, the average price of crude currently purchased by Japanese companies has reached $140 to $200 per barrel. Over 90% of Japan's oil is supplied by the Middle East, and the current supply shock poses a grave challenge to its energy security.

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