Key facts
- Asian refiners are purchasing crude oil from Argentina to compensate for Middle East supply disruptions.
- Argentina's Medanito crude, comparable to WTI, is being sold at a discount.
- The trade route from Argentina to Asia avoids major maritime chokepoints.
- Asian diesel exports to Africa have reached nearly five-year highs.
- Middle East diesel exports to Africa have fallen to nine-year lows.
- Security threats in key shipping straits and refinery issues are impacting Middle East fuel supplies.
Asian refiners, including those in China, Japan, and South Korea, are increasingly turning to Argentina for crude oil supplies to circumvent disruptions in the Middle East. The ongoing conflict and security threats in the Strait of Hormuz and the Bab el-Mandeb Strait have made traditional supply routes challenging. Argentina's Medanito crude, produced from the Vaca Muerta shale basin, is being purchased at a discount of $1-$2 per barrel compared to U.S. West Texas Intermediate (WTI) and offers a trade route that avoids major maritime chokepoints. Concurrently, Asia's diesel exports to Africa are surging to nearly five-year highs, as Middle East sales to the continent have plummeted to nine-year lows due to the same geopolitical tensions and refinery outages. Saudi Arabia, previously a significant supplier to Africa, has seen its exports crippled by attacks on its energy infrastructure. The Jazan refinery, for instance, shipped no diesel to Africa in August, a stark contrast to the previous month. Analysts note that the wide open East-West arbitrage for Asian exports into Africa is likely to persist as China eases fuel export restrictions and other Asian refiners increase their operational rates.