Global Oil Demand Softens as Asian Refiners Slow Middle East Crude Purchases amid Hormuz Easing Fears

Global Oil Demand Softens as Asian Refiners Slow Middle East Crude Purchases amid Hormuz Easing Fears​

Asia's Buying Spree Ends as Majors Absorb Surplus Crude Barrels​

Asian refiners have significantly moderated their purchases of Middle Eastern crude after a robust buying period spanning the last three weeks. This shift comes as oil majors and specialized trading houses step in to absorb much of the available surplus barrels.

Traders familiar with the commodity markets indicated that purchases from Abu Dhabi National Oil Co. (Adnoc) eased following its first three tendering rounds. The upcoming fourth tender, scheduled to close this week, is expected to follow a similar pattern of moderated demand.

Major players such as Shell Plc and Mercuria Energy Group Ltd. have actively participated in securing these barrels. Adnoc successfully sold approximately 60 million barrels across its initial three tenders over the period spanning June to August. The majority of these cargoes are destined for Asian markets.

European Demand Emerges as Asian Refiners Pivot Focus​

While most refiners globally have already secured their necessary orders for both the current month and the next, prompting a slowdown in new purchases, there is movement toward Europe. Some of the barrels offered in Adnoc’s latest tender rounds are reportedly headed towards Europe. This trend follows a recent pattern where volumes of Middle Eastern oil were diverted away from China.

Adnoc has also initiated calls for customers holding long-term contracts to resume loading supplies immediately. This action is designed to constrain and solidify spot market demand.

Producer Output Rises as Hormuz Tensions Ease​

In the context of potential geopolitical stability, Iraq and Kuwait are increasing their respective production outputs. These producers are positioning themselves in anticipation of a possible resumption of normal traffic through the Strait of Hormuz.

These developments follow reports suggesting progress has been made in diplomatic talks aimed at concluding an agreement that would end the war with Iran. This positive outlook has contributed to market shifts, leading prices for Middle Eastern oil to experience downturns.

Bearish Trend Emerges as Crude Market Reaches Contango​

The forward curve for two of the region’s primary benchmark grades, specifically Dubai and Murban, is now exhibiting a bearish contango structure. This indicates that immediate market supply is outpacing near-term demand expectations.

A temporary US waiver permitting the purchase of Iranian oil has further amplified the available supply options in the global market. However, refiners must contend with significant risks associated with financing and insurance complexities for these cargoes.

Storage Considered as Supply Wave Swells​

Market participants are currently assessing whether crude storage represents a viable option to manage the impending surge in commodity supply. Traders noted that current freight costs remain prohibitively high, making floating storage an inefficient solution.

Nevertheless, this surplus could be easily accommodated by countries possessing land-based storage facilities. Shell and Adnoc declined to provide comment on these market dynamics, while Mercuria did not immediately respond to a request for commentary.