Escalating tensions in the Strait of Hormuz forced Asian refiners and shipowners to weigh alternative crude sources, deploy contingency plans and boost safety measures for navigation along Iran’s coastal areas, industry sources and officials told S&P Global Platts Monday. Asian oil importers’ moves intensified after Iran on Friday seized a UK chemical tanker and briefly detained a UK-owned VLCC in one of the world’s most critical chokepoints, ratcheting up regional tensions and risks to oil shipments.
“We may look for more shipments from the US, the central Asia and other non-Middle East regions to avoid the risks over the Strait of Hormuz,” said an official at SK Innovation, South Korea’s biggest refiner. SK Innovation imports the bulk of its crude from Kuwait, Saudi Arabia and Iraq. Japan’s largest refiner JXTG Nippon Oil & Energy is considering crude procurements that do not transit through the Strait of Hormuz, while keeping its core supply from the Middle East, a spokesman said. Japanese refiners Idemitsu Kosan and Cosmo Oil were also placing their shipments under safety measures to ship crude oil through the Strait of Hormuz, company officials said Monday.
In India, an oil ministry official said: “Our refiners are unlikely to face any severe crisis due to the ongoing tension around the Strait of Hormuz as we have robust crude sourcing plans in place. We are open to source crude from anywhere including the US, provided the price is competitive.” Nearly 18 million b/d of oil transits from the Middle East to Asia via the Strait of Hormuz, according to the International Energy Agency.
Middle East tensions have increased crude purchasing costs for Chinese buyers, with freight and insurance premiums rising significantly, but a war in the region seems unlikely, a Beijing-based trading source with a national oil company said.