Asian countries rethink oil routes and stockpiles amid Strait of Hormuz disruption
Asian governments and refiners rushed to assess oil stockpiles as well as alternative shipping routes and supplies as the Iran conflict disrupted shipping in the crucial Strait of Hormuz, with oil prices expected to rise when trading resumes on Monday.
Asia will feel the biggest impact from any disruption in Middle East oil supply as it buys two-thirds of its crude from the Gulf, with half of top global importer China’s supply and 90% of Japan’s coming from the region.
Japanese shipping firms said they are halting operations around the Strait of Hormuz, although Chief Cabinet Secretary Minoru Kihara said Tokyo had not received any reports of an immediate impact on supply for Japan.
However, Indian state refiners have already started scouting for alternative supplies, two refining officials said, declining to be identified. India, the world’s No.2 oil importer, has been increasing imports from the Middle East to replace Russian crude.
As for South Korea, the government will offer petroleum from its stockpiles to local industries if any supply disruptions are prolonged, the industry ministry said in a statement on Sunday following an emergency meeting.
China, meanwhile, has bulked up its crude stockpiles in recent months, with imports hitting a record in December.
June Goh, senior analyst at Sparta Commodities, said oil prices would likely trade higher, with the impact tempered by an expected increase in production from the OPEC+ producers’ group.
She noted that oil infrastructure was not yet affected.
“The industry is currently grappling with a slowdown in shipping activity via the Strait of Hormuz due to insurability, not an outright blockade,” she said.
Several tanker owners, oil majors and trading houses have suspended crude, fuel and liquefied natural gas shipments via the Strait.
The Strait of Hormuz is the narrow waterway between Iran and Oman connecting the Gulf to the Arabian Sea, and on a typical day tankers carrying the equivalent of 20% of global oil consumption pass through it with cargoes from producers such as Saudi Arabia, Iraq, Iran, the UAE, Kuwait and Qatar.
