Saudi Aramco’s yearly supply talks with its Asian customers have hit a wall, and what refiners across the region pay for crude in 2027 depends on how it ends. Traders involved in the negotiations told Bloomberg the sticking point is whether spot cargoes bought this year count toward refiners’ contractual obligations for 2026.
The Spot Purchase Argument
The war in the Middle East cut exports from the region, so Saudi customers could not collect their contracted supply. Refiners turned to spot buying to keep plants running. Aramco stepped up spot sales to Asia from early September, helped by a recovery in flows through the Strait of Hormuz even as ships were still being attacked.
Some refiners say that prompt buying should count toward their 2026 contracts. Without it, the traders said, many would miss their volumes. Aramco is pushing back and wants them to take more oil under contract next year. At least one refiner was asked to make up this year’s shortfall by committing to more crude in 2027, and it is balking.
Many buyers are reluctant to sign up for more next year while the war shows little sign of ending. The standoff is also slowing purchases of Saudi crude and of oil from other Middle Eastern producers. Talks normally wrap up by the end of October, because Asian refiners usually order January-loading cargoes on the spot market in November and need to know their term volumes first.
Abu Dhabi National Oil Co has taken a looser line. It is letting spot purchases count toward some Asian refiners’ annual import obligations this year, though it has not decided about 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.
New Terms on the Table
Aramco has floated changes to pricing benchmarks and delivery terms. One option is for the Saudi producer to carry the crude to some Asian customers itself. That matters because freight has become a huge part of the bill. Shipping a barrel from the Middle East to East Asia cost about $3 before the war and now costs more than $30, according to the New York Times. A tanker loading at Yanbu for South Korea now goes around Africa to avoid the Bab el-Mandeb Strait, spending more than 50 days at sea instead of about 23.
What It Means Closer to Home
Fuel prices are the way these talks reach ordinary households. Diesel markets are already tight, and the International Energy Agency expects them to stay that way well into 2027. Families who depend on affordable transport and small businesses that rely on delivery trucks feel it first when crude costs rise. How Asian refiners buy Middle Eastern oil will stay uncertain until the security situation settles.
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)
