Asian oil refiners could cut run rates on Hormuz logjam

2026-03-03 - 13:34

About a fifth of the world’s oil passes through the vital Strait of Hormuz waterway, and the passage of ships has slowed dramatically since the weekend. (AFP pic) NEW YORK: Asian oil refiners are considering whether to cut run rates or bring forward maintenance as the widening Middle East war and difficulties shipping through the Strait of Hormuz threaten their access to crude. “Some major processors are looking at run cuts of 20% to 30% as dozens of oil-laden tankers remain stuck in the Persian Gulf,” said people with knowledge of these deliberations. “Chinese and Japanese refiners – particularly state-owned and larger companies – are most likely to reduce rates, given their heavy reliance on crude from the gulf,” said the people, asking not to be named as the information is private. Major Asian markets like China, India, South Korea and Japan are among the most reliant on oil that needs to transit Hormuz, taking cargoes on long-term contracts from producers such as Saudi Arabia, Iraq and the UAE. These shipments usually take about 15 to 30 days to arrive at ports across Asia, which makes them tough to replace from more distant sources in the Americas, Europe and Africa. About a fifth of the world’s oil passes through the vital waterway, and the passage of ships has slowed dramatically since the weekend, when US and Israeli attacks on Iran escalated into a wider regional conflict. The Joint Maritime Information Center, a multinational naval advisory group, raised its security alert to the highest level, citing missile and drone attacks against multiple vessels. “Maritime traffic through the conduit had plunged by about 80%,” it said. “Refineries are cutting runs out of fear of not getting the Middle Eastern crude that they want,” Anthony Yuen, a commodities analyst with Citigroup Inc, said in a video webcast. “The price of alternative barrels from the Atlantic Basin will be very high given expensive freight costs, creating the ‘strange phenomenon’ of processors reducing activity despite healthy fuel-producing profits,” he said. “Zhejiang Petrochemical Co, a Chinese mega-refinery in which Saudi Aramco holds a minority stake, will carry out a routine maintenance in March on a crude distillation unit with a refining capacity of 10 million tonnes a year,” Rongsheng Petrochemical Co, the plant’s main shareholder, said in a statement. “The company will adjust operating rates as needed. “Going forward, based on the maintenance progress, developments in the Middle East conflict, and the procurement and arrival of non–Middle East crude grades, the company will keep operating rates at a reasonable level to ensure the refinery’s overall stable operations,” Rongsheng said. Some other major processors, including joint ventures with foreign oil majors operated by state-owned firms such as Cnooc Ltd, China Petroleum & Chemical Corp and Sinochem Group, are also vulnerable to the war in the Middle East. Unlike the smaller independents, or teapots, these refineries usually avoid buying sensitive crudes from Russia and Iran. Representatives with Cnooc, Sinopec and Sinochem didn’t immediately respond to media inquiries. Iranian oil needs to transit Hormuz, although large volumes of the country’s crude on tankers at sea in Asian waters are creating a temporary buffer. Refineries typically have at least two-to-three weeks of crude inventories to cushion them from any short-term delays or supply disruptions. Replacement options in Asia include oil from Middle Eastern producers that loads outside the Persian Gulf, regional crudes from Malaysia and Vietnam, as well as supplies in storage in China, South Korea and Japan.