Key facts
- Middle East fuel oil exports are projected to reach a four-month high in June, increasing by 20% to 508,000 bpd.
- Saudi Aramco has resumed crude loading at its Ras Tanura terminal after a nearly four-month halt.
- Asian refiners are reducing spot purchases of Middle East crude for June and July.
- High freight costs and uncertainty over the Strait of Hormuz are deterring Asian buyers.
- Several Middle Eastern producers, including Saudi Arabia, Iraq, and Kuwait, are increasing or preparing to increase oil output and exports.
Saudi Aramco has resumed crude loading at its main Persian Gulf oil terminal, Ras Tanura, after it was idle since early March. Two Very Large Crude Carriers were seen loading crude, with another waiting. This resumption contributes to a projected four-month high in Middle East fuel oil exports for June, with Iraq, Saudi Arabia, and Oman increasing shipments.
However, Asian refiners are scaling back their spot purchases of Middle East crude for June and July. This shift is attributed to lingering uncertainties about the navigability of the Strait of Hormuz, high freight costs, and sufficient non-Middle Eastern crude supplies already lined up. Producers in the Middle East, including the UAE, Iraq, Kuwait, and Saudi Arabia, are boosting or preparing to boost production and exports, with Kuwait aiming for 2 million bpd and Iraq targeting over 3 million bpd from its southern fields. Iran is also reportedly pitching its oil to Asian buyers outside China, benefiting from a temporary U.S. sanctions waiver.
Despite these increased production efforts, Asian demand for immediate Middle Eastern crude is waning. Significant discounts are reportedly not offsetting the high insurance and tanker freight costs associated with the Strait of Hormuz. Furthermore, the price of benchmark Middle East crude grades has fallen as a U.S.-Iran memorandum of understanding raised hopes for recovering supply.
Crude oil prices were on course for a sharp weekly loss amid multiple reports about a strong rebound in tanker traffic in the Strait of Hormuz. Brent crude traded around $73.78 per barrel, and West Texas Intermediate around $70.53. An Iranian strike on a commercial vessel in Hormuz caused a temporary reversal in oil price movements, but did not fully offset optimism about tanker traffic. Analysts remain cautious, noting that most traffic is outbound and inbound flows are modest. Reuters pointed out that overall vessel traffic remains a fraction of pre-war levels. Additionally, earthquakes in Venezuela are expected to disrupt oil production there.