North Asian refiners eye smaller Gulf crude share in 2027 term contracts

what happened

Reuters, citing people familiar with the matter, reports that at least three refiners in North Asia are considering smaller Middle Eastern crude allocations in their 2027 contracts, freeing room for barrels from other producing regions. The shift follows a year in which shipments from the Gulf were heavily disrupted.

Most Asian buyers, apart from India's, renew annual term agreements with Gulf suppliers in October. Normally they dispatch tankers to the Gulf to pick up cargoes bought mostly free-on-board under those deals. Attacks on vessels in the Strait of Hormuz have made those voyages unsafe for most of 2026, so buyers are becoming more cautious about long-term commitments, given uncertainty over how the conflict will end and the state of the waterway.

Meanwhile, Saudi Aramco, ADNOC, Kuwait Petroleum and QatarEnergy are moving crude out of the strait and selling it spot through ship-to-ship transfers in the Gulf of Oman, while SOMO offers steep discounts for barrels loaded inside the Gulf. Producers and buyers disagree on whether spot sales can count toward term obligations, and Aramco has reportedly asked at least one customer to make up its 2026 shortfall in 2027. Aramco declined to comment.

why it matters

For oil markets, a shift away from Gulf term barrels would reshape flows among grades and suppliers, and prolonged uncertainty over Hormuz shipping keeps a risk premium in prices. The dispute over how spot cargoes are counted shows the disruption is reaching contract terms, not just physical volumes.

market impact

Brent, Dubai: a possible shift of Asian term demand away from Gulf contracts alters regional flows and price spreads

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