Asia’s profit margins from refining reach highest point in four years as crude oil supply tightens due to Hormuz disruptions

Asian Refining Margins Surge Amid Strait of Hormuz Disruption

Crude oil shipments from the Middle East to Asia have been severely disrupted due to the effective closure of the Strait of Hormuz, resulting in Asian refining margins reaching their highest levels in four years.

According to data from LSEG referenced by Reuters, the Singapore complex refining margin—a key indicator of refinery profitability in Asia—soared to nearly $30 per barrel on Wednesday.

This marks the strongest performance for the benchmark margin since 2022, as refiners reduce processing rates and suspend fuel exports to manage the delays in crude supply.

Major Asian refiners, especially state-owned companies that rely heavily on Middle Eastern oil, are reportedly considering cutting crude throughput by as much as 30%. The ongoing conflict in Iran has left millions of barrels of oil stranded near the Strait of Hormuz, intensifying the supply crunch.

The near-total halt of shipments through the Strait of Hormuz is causing significant delays for crucial cargoes that Asian refiners had recently secured.

With dozens of oil tankers still unable to exit the Persian Gulf, major refiners in China and Japan are reportedly weighing reductions in crude processing by 20-30%, according to sources who spoke to Bloomberg earlier this week.

Additionally, Chinese authorities have instructed energy firms to halt new fuel export agreements and attempt to cancel existing shipments, as the global fuel market tightens in response to the Middle Eastern conflict.

Meanwhile, Saudi Arabia has closed its largest refinery, Ras Tanura, which processes 550,000 barrels per day, following drone strikes attributed to Iran. This has further heightened concerns over Middle Eastern fuel supplies, especially for diesel and jet fuel.

Analysts at Kpler note that diesel is currently facing the most severe supply constraints, with few immediate alternatives available. This makes the risk to diesel supplies even more pronounced than for crude oil, jet fuel, or LNG.

By Tsvetana Paraskova for Oilprice.com