Saudi Arabia and Asia Locked In Dispute Over 2027 Term Oil Deals

In a dispute over 2027 term oil deals, Saudi Arabia and Asian refiners find themselves at odds. The reason behind the conflict is the Iran war, which has significantly reduced fixed-term supplies this year. Saudi exporters have turned to spot sales to meet their export obligations to Asia.

Asian refiners are negotiating the term supplies of crude oil for 2027, but they are divided on whether the spot sales from this year should be included in the 2026 term supplies. The refiners argue that the spot sales should be treated as fixed term sales due to the seller's inability to provide the promised cargoes. However, Saudi Arabia maintains that refiners should commit to purchasing larger volumes of its crude oil in 2027, as the buyers have not fulfilled their contractual obligations for term supply this year.

The disagreement has spilled over into the spot market, slowing down Asian purchases of November-loading crude from Saudi Arabia and other Middle Eastern producers. This delay in contract negotiations is problematic, as Asian refiners usually order November 2026 spot cargoes that would load in January 2027. Without clear visibility on term supplies for January, the Middle Eastern spot market becomes challenging to predict.

Abu Dhabi’s ADNOC has granted some Asian refiners the option to count their spot supply toward the contractual term supplies. However, the buyers and sellers have not yet agreed on whether this arrangement will continue into the following year. The resolution of this dispute is crucial, as it will impact the availability and pricing of oil in the Asian market, especially during a period of geopolitical uncertainty and ongoing conflict in the Strait of Hormuz.