Asian refiners and Middle Eastern producers are currently negotiating the term supplies of crude oil for 2027, as usual. The unusual part is that the Iran war has crippled fixed-term supplies this year, and Middle Eastern exporters have resorted to increased spot sales to deliver crude oil to their most important export destination.
With days left to conclude negotiations on the 2027 term sales under fixed volumes, refiners in Asia and Saudi Arabia are in disagreement over whether this year’s spot sales should be counted into the 2026 term supplies, unnamed traders involved in the discussions told Bloomberg on Tuesday.
Refiners insist that spot sale volumes they have bought this year should be treated as fixed term sales because the seller simply could not provide the contractual cargoes. But Saudi Arabia is reportedly insisting that refiners should commit to buying higher volumes of its crude oil in 2027 as the buyers haven’t met their contractual obligations for purchasing term supply this year.
The refiners disagree with the Saudi interpretation, and the dispute appears to have spilled onto the spot market, slowing down Asian purchases of November-loading crude from Saudi Arabia and other Middle Eastern producers, according to Bloomberg’s sources.
Asian refiners in general are not willing to commit to higher term supply commitments next year, considering the ongoing conflict and the still high uncertainty about when and how all this Strait of Hormuz mess would end.
The contract negotiations need to conclude very soon, as Asian refiners typically order in November 2026 spot cargoes that would load in January 2027. If they don’t know how much term supply they will take in January, the visibility on spot purchases would be very little, leaving the Middle Eastern spot market difficult to assess and predict, once again.
Abu Dhabi’s ADNOC, however, has allowed some Asian refiners to count their spot supply toward the contractual term supplies, per Bloomberg’s sources, although the buyers and sellers haven’t decided yet if the arrangement would continue into next year.
By Charles Kennedy for Oilprice.com
