Asia's refined fuel imports hit post-war low as Iran crisis deepens

Asia's refined fuel imports fell to their lowest level since the start of the Iran conflict in August, as the region grapples with a supply crunch that has pushed refining margins to multi-year highs.

Data from commodities analyst Kpler shows Asia imported an estimated 5.10 million barrels per day (bpd) of light and middle distillates in August, down from 5.61 million bpd in July. This is roughly 2 million bpd below the 7.06 million bpd average recorded in the three months before the US and Israel launched aerial strikes against Iran on February 28.

While much of the market's attention has focused on crude supply disruptions through the Strait of Hormuz, the more immediate pressure is in refined products. Middle distillates like diesel and jet fuel have been hit hardest, with cargo losses from the Middle East compounded by reduced Russian fuel shipments following Ukrainian strikes on refineries.

Prices reflect the strain. Singapore gasoil settled at $155.15 a barrel on Monday, up 70% from $91.42 on February 27. The profit margin for producing a barrel of gasoil at a typical Singapore refinery ended at $67.93, three times the pre-war level of $21.90. Gasoline margins have similarly tripled to $27.47 per barrel.

Middle East exports of light and middle distillates are estimated at 2.14 million bpd in August, down from 2.58 million bpd in July and 55% below the 4.49 million bpd average for the three months to end-February. The drop in Asia's imports almost exactly mirrors the loss of Middle East supply.

Despite the damage to Gulf refining sites in the early phase of the war, much capacity has been repaired. Saudi Arabia and the UAE likely have the ability to produce more fuels for Asia. The bottleneck appears to be logistics — a shortage of product tankers and the difficulty of ship-to-ship transfers while navigating the Strait of Hormuz under the threat of Iranian attacks.

The crisis has underscored the oil market's adaptability, but the question remains whether Middle East producers can pivot to exporting more refined products to ease the pressure on Asian economies facing high fuel prices and constrained supply.