Asia, particularly countries like Thailand, Japan, South Korea, and Taiwan, is heavily dependent on U.S. crude oil as a primary non-Middle Eastern supply source. According to industry reports, the high prices of WTI Midland and West Texas Light crude oil being shipped to Asia reflect the high value of supply reliability and logistics security.
Increase in Demand and Prices
Feedstock managers at refineries located in Ngishi, Ulsan, Xiaogang, and Reyong, along with traders based in Singapore, have reported high demand for American crude oil in recent weeks. Refinery trading teams are facing challenges in securing better offers in cash markets, and the high prices of WTI Midland have consistently been over $10 per barrel since the beginning of the second quarter of the year.
According to refinery managers, rising transportation and insurance costs in the Gulf and Far East Asia, as well as transportation security risks, have made the high prices of U.S. crude oil seen as a sign of greater reliability in delivery and supply.
Market Activities and Purchases
The CPC refinery in Taiwan has purchased six shipments of WTI Midland crude oil scheduled for arrival in January through a monthly tender, with initial prices recorded at around $20 per barrel compared to Brent prices. Japan's largest refiner, ENEOS, has also purchased WTI Midland crude oil for arrival in December at prices around $20 per barrel.
In South Asia, HPCL of India has purchased light crude oil barrels at prices over $12 per barrel compared to Brent prices. Additionally, Cnergyico of Pakistan expects to receive 1 million barrels of WTI Midland in the coming days.
One feedstock manager at a major Japanese refinery in Ngishi stated, "In times of high uncertainty regarding supply and logistics security, the high price of oil for shipments that are likely to be delivered on time is justifiable."
Diversification Supply Strategy
South Korea, as the largest buyer of U.S. crude oil in Asia, is working to diversify its oil suppliers. The South Korean government has planned to reduce the share of imported crude oil from any specific region to less than 50% by 2035. According to the latest published data, the share of Middle Eastern crude oil in the total imports of South Korean refineries in the first nine months of the year was 62%.
The Ministry of Trade, Industry and Energy of South Korea stated in a report: "The goal is to reduce vulnerability to geopolitical conflicts and disruptions affecting concentrated supply routes." The ministry also mentioned the diversification of oil suppliers, import routes, transportation methods, and types of crude oil.
Ultimately, in the first nine months of this year, South Korea received 144.22 million barrels of American crude oil, which is a 19.1% increase compared to the same period last year.
