Stockpiling of oil surges, prices soar, Asian fuel supply faces tightness

The Iran-Israel conflict has cut off the energy route through the Strait of Hormuz, causing suppliers across Asia to reduce shipments of ship fuel and liquefied petroleum gas. A regional energy crisis is rapidly spreading.

The global oil transit route through the Strait of Hormuz is nearly halted. According to Bloomberg, the impact is fierce, and even well-stocked markets are not immune. The fuel supplier at Singapore, the world’s largest ship refueling port, has notified customers that it can only fulfill part of existing contracts due to a significant reduction in upstream deliveries.

In terms of prices, the surge in demand for supplies has driven prices of jet fuel, marine diesel, and other products sharply higher. Platts (a pricing agency under S&P Global Energy) recently adjusted its pricing methodology, further highlighting the intensity of this price spike, putting additional pressure on Asian importers and end consumers.

Governments are actively responding: Japanese refineries have applied to authorities to activate strategic petroleum reserves; South Korea has issued a Level 1 energy alert, promising to crack down on price gouging; India is urgently negotiating with producing countries over liquefied petroleum gas imports; Bangladesh has begun reducing fuel allocations to gas stations.

Singapore in Crisis: Ship Fuel Orders Reduced

The Strait of Hormuz is one of the world’s most important energy transit routes, with daily crossings of oil and natural gas accounting for a significant share of global trade. The near interruption of this route directly affects the supply chain of crude oil and refined products to refineries and end-users across Asia.

As the world’s largest ship refueling port, Singapore’s actions serve as a barometer for international shipping. Bloomberg, citing sources, reports that local ship fuel suppliers have notified customers they can only deliver part of their previously agreed quantities due to a sharp reduction in upstream supplies.

South Korea issues Level 1 energy alert, vows to crack down on price gouging

On March 5, the Ministry of Trade, Industry and Energy of South Korea issued a Level 1 alert, warning that it will strictly crack down on market-disturbing behaviors such as price gouging. Level 1 is the lowest of four levels in South Korea’s national resource security alert system.

According to Xinhua citing Yonhap News Agency, the Ministry stated that South Korea’s short-term energy supply remains sufficient. The alert is a preventive measure against potential energy crises, aiming to minimize impacts on livelihoods and industrial production.

South Korea’s petrochemical sector has already been affected. Yeochun NCC, a Korean petrochemical producer, announced that due to disruptions in naphtha deliveries, it will invoke force majeure clauses on some sales contracts.

Naphtha is a key raw material for producing ethylene and other basic chemicals, mainly sourced from the Middle East. If this disruption persists, it could cause chain reactions affecting downstream chemical supplies.

Japan Requests Release of Strategic Reserves; India Urgently Seeks Import Sources

Japan, heavily dependent on crude oil imports, is in a particularly vulnerable position. About 90% of its oil comes from the Middle East. Japanese refineries have applied to the government to release national strategic petroleum reserves to make up the shortfall.

Liquefied petroleum gas (LPG) is a primary cooking fuel for many households across Asia, with the Middle East being one of the region’s most important suppliers.

India, one of the most affected markets, is actively negotiating with producing countries, but options are limited due to long transportation distances from the U.S. and difficulty in timely replacement. According to Bloomberg, some countries may ultimately have to implement some form of rationing.

Prices Surge, Bangladesh Leads in Supply Restrictions

Faced with soaring fuel prices, Bangladesh has taken the lead. The country is preparing to cut fuel supplies to gas stations and has called on the public to reduce unnecessary private vehicle use to curb consumption. These measures reflect the severe impact of high energy prices on developing economies in Asia.

Prices of jet fuel and marine diesel have risen particularly sharply. The recent adjustment in Platts’ physical oil pricing methodology has further amplified price signals, making the market more pessimistic about supply-demand imbalances.

The situation is still evolving. The key focus remains on when the Strait of Hormuz can resume normal navigation and whether governments can balance strategic reserve use with demand management.

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