DHAHRAN, October 20, 2026 — Saudi Aramco and a group of Asian oil refiners are at an impasse over the 2027 supply contracts that will shape how much crude reaches families across the region next year. The deadlock centres on whether spot‑market purchases made in 2026 can be counted toward existing contractual quotas, a question that has been sharpened by the ongoing war in the Middle East.
Contract Negotiations Stalled
Negotiations that usually finish by the end of October have stalled, traders said, because Aramco and the refiners cannot agree on how to treat the wave of spot purchases that followed the export disruption caused by the war. The dispute is a direct result of the conflict that cut Persian Gulf exports and forced many buyers to turn to the spot market for immediate supply, according to traders involved in the talks.
Under normal circumstances, Asian refiners lock in volumes for the January‑loading cargoes in November, after the term‑contract discussions are wrapped up. This year, however, the uncertainty over future flows has left many processors uneasy about committing to larger volumes for 2027. “Many Asian oil buyers are reticent to commit to more contracted purchases next year, given the uncertainties over flows as the war shows little sign of ending,” the traders explained.
At least one refiner has been asked by Aramco to compensate for the shortfall in 2026 by taking additional crude in 2027, a request it has rejected, the traders added. The refusal highlights how the disagreement is spilling over into the spot market, slowing purchases of Saudi crude as well as oil from other West Asian producers.
Spot Purchases and the War’s Aftermath
When the war disrupted the regular flow of oil, refiners scrambled for spot cargoes to keep their plants running. Aramco responded by increasing spot sales to Asia from early September, taking advantage of a brief recovery in flows through the Strait of Hormuz even as attacks on ships continued, according to the same traders.
Refiners now argue that those prompt purchases should count toward their 2026 contractual obligations. If the spot buying is excluded, many would fall short of the volumes they agreed to deliver last year, leaving a gap that could affect fuel availability for households and transport operators across the region.
Abu Dhabi National Oil Co (Adnoc) has chosen a different path, allowing spot purchases to count toward some Asian refiners’ annual import obligations this year, though it has not yet decided whether the same flexibility will apply in 2027. “As a resilient and reliable energy provider, Adnoc remains committed to supporting our customers across Asia and providing flexibility as we meet their requirements,” the company said in a response to questions.
Aramco’s New Proposals
Facing the shortfall, Aramco is pressing refiners to commit to higher volumes for 2027. The company says the additional oil under contract will help make up for the missed deliveries of 2026, the traders reported. In addition, Aramco has floated the idea of changing pricing benchmarks and delivery terms. One option under consideration is that the Saudi producer would take responsibility for transporting the crude directly to some Asian customers, a move that could simplify logistics but also shift cost structures.
Shipping costs have surged dramatically. A barrel that cost roughly USD 3 to move from the Middle East to East Asia before the war now costs more than USD 30, according to the New York Times. The rise reflects fewer available vessels, longer routes that avoid the Bab el‑Mandeb Strait, and heightened insurance premiums. Higher freight rates are already feeding into the price of crude that refiners must pay, which in turn affects the price at the pump for families in Japan, South Korea, India and beyond.
Aramco’s willingness to adjust benchmarks may be an attempt to keep its oil attractive despite the cost pressure. The company has not disclosed which benchmarks it might adopt, but any change would be reflected in the contracts that determine how much refiners pay for each barrel.
What It Means for Communities Across Asia
For ordinary people, the outcome of these negotiations will be felt in daily life. Higher contract volumes could stabilize supply and keep diesel and gasoline prices from spiking further, a concern that has already been voiced as diesel markets remain tight into 2027, according to the International Energy Agency. Families that rely on affordable transport for work and school will watch the market closely.
Conversely, if the stalemate persists and spot purchases are excluded from the 2026 quotas, refiners may need to source crude from more distant regions at higher freight costs. That scenario could translate into higher fuel prices, putting pressure on household budgets and on small businesses that depend on reliable logistics.
The broader shift in procurement strategy—moving away from long‑term contracts toward more flexible, spot‑based buying—signals a new era for Asian energy markets. While flexibility can help refiners adapt to sudden disruptions, it also introduces volatility that can ripple through the supply chain, affecting everything from the price of a cup of tea in a street market to the cost of shipping goods across the Pacific.
As the war shows no sign of ending, both Aramco and Asian refiners face a delicate balancing act: securing enough oil to keep lights on and engines running, while navigating a market where every barrel now carries a higher freight tag. The decisions made in the coming weeks will shape the energy landscape for families and businesses across the region for years to come.
Sources
- Asia refiners in dispute with Saudis over 2027 oil contracts
- Asian refiners in dispute with Saudis over 2027 oil contracts
- Diesel: all indicators turning red
Photo: Carl Young (CC BY-SA 4.0)
