Asian refiners in dispute with Saudis over 2027 oil contracts

Saudi Aramco and Asian refiners are locked in a disagreement over oil contracts for 2027 due to issues with existing purchases. The conflict stems from the ongoing war in West Asia, which reduced exports and left refiners unable to fulfill their contracted supplies. To compensate, Saudi Arabia increased spot sales to Asia in early September, capitalizing on a recovery in Strait of Hormuz flows despite ongoing attacks on ships.

Aramco now seeks to revert to selling more oil under contract for next year, but the exact terms are disputed. Chinese traders, not authorized to speak to the media, say the recent spot-market purchases should not count toward refiners' annual contractual obligations. Some processors, however, argue the prompt purchases should be included, while Aramco insists they must purchase more oil under contract next year to cover the shortfalls.

A few refiners have been asked by Aramco to compensate this year's shortfall by committing to take more crude in 2027. This demand has been met with reluctance by many Asian oil buyers, who are hesitant to commit to more contracted purchases next year due to uncertainties in flows amid the ongoing war. Term-contract discussions typically conclude by the end of October, when refiners order January-loading West Asian crude from the spot market in November.

The issue of how Asian refiners will buy oil from West Asia remains uncertain until the security situation in the region stabilizes. Aramco has suggested changing pricing benchmarks and delivery terms in its supply contracts. One possibility is that the Saudi producer would take on the responsibility of transporting the crude directly to some of its Asian customers.