Higher and higher: stronger Asia buying absorbs rising Middle Eastern spot supply

Over the next two to three months, Middle Eastern producers have escalated tender activity for spot cargoes, indicating potential greater availability despite rising award prices. Chinese buyers have re-entered Middle Eastern spot tenders, securing cargoes for September-November loading via STS in the Gulf of Oman. Clearing prices at recent tenders have increased, reflecting elevated Hormuz delivery risk premiums and stronger buying demand.

Refineries continue to run at high rates due to robust product cracks, sustaining reliable crude feedstock supplies. ADNOC reportedly sold 16 Mbbls of offshore crude to Chinese, Japanese, Indian, and Malaysian buyers in its ninth tender round. QatarEnergy awarded cargoes to a Thai refiner at around Dubai +$6/bbl. Iraq’s SOMO sold Basrah Medium and Basrah Heavy for more than Dubai +$10/bbl to Asian buyers.

Saudi Aramco joined the trend, marketing early September-loading Arab Medium and Arab Heavy cargoes. China's onshore crude inventories fell to 1,172 Mbbls, covering around 88 days of refinery demand. Reduced Iranian crude availability is creating operational uncertainty for teapots, who are selling gasoline and diesel to state-owned refiners to capture strong margins.

Middle distillate cracks hold firm at around $60/bbl, incentivizing refiners to maintain high run rates and secure reliable crude feedstock supplies. Some refiners may opt for cheaper barrels due to sufficient inventory buffers, but rising Middle Eastern dynamics encourage others to secure feedstock while supplies remain accessible.