Gasoline Flows Shift to Asia Amid Iran War and Rising Supply Fears

European and U.S. Gasoline cargoes are being redirected to the Asia Pacific region as Asian prices surge due to tightening supply stemming from the ongoing conflict involving the U.S., Israel, and Iran. The war has significantly disrupted crude and oil product shipments from the Middle East, impacting refinery output and forcing fuel distributors to seek alternative sources, even from as far away as the United States and Russia.

Disrupted Supply Chains and Rising Costs

The escalating tensions in the Middle East have created significant disruptions to the global oil supply chain. Iran has effectively blocked the Strait of Hormuz, a critical waterway for oil and liquefied natural gas (LNG) shipments, since the U.S. And Israel launched attacks on the country on February 28th . Approximately 20% of the world’s oil and LNG typically transits through this vital chokepoint, and the conflict has already sent global fuel prices soaring. The International Energy Agency (IEA) chief, Fatih Birol, warned that the situation could lead to the worst energy crisis in decades, comparing it to the crises of the 1970s and the impact of Russia’s 2022 invasion of Ukraine .

Cargo Shifts and Market Dynamics

At least three gasoline cargoes, totaling around 1.6 million barrels, were loaded from Europe for Asia last week, with companies like Vitol and TotalEnergies capitalizing on the higher margins available in the Asian market . Exxon Mobil has also booked U.S. Gasoline cargoes destined for Australia. Europe typically focuses its gasoline exports on the U.S., Latin America, and West Africa, making this shift to Asia unusual.

Asian refiners are currently seeing profits of around $37 per barrel from processing Brent crude into gasoline, nearing 2022 highs, compared to $8 before the conflict began . Analysts at Rystad Energy note that refinery behavior is being influenced by the uncertainty surrounding crude supply, with some refiners becoming more cautious about production levels and export commitments .

Regional Supply Challenges

Gasoline supply within the Asia Pacific region is also facing challenges. Shipments from South Korea, a major fuel exporter, are expected to decrease to between 5 million and 6 million barrels in March, down from a three-month average of approximately 10 million barrels . China has implemented a ban on fuel exports to ensure sufficient domestic supply, and Thailand and Vietnam have also restricted their fuel exports.

India’s Potential Role

Traders are looking to India, Asia’s second-largest fuel exporter, to potentially fill the supply gap. India typically sends around 40% of its monthly shipments (7-8 million barrels) to the Middle East. However, India’s gasoline exports have already fallen to approximately 5-6 million barrels in March, down from around 12 million barrels last month, due to temporary suspensions of cargo loadings at Mangalore Refinery and Petrochemicals .

Recent Shipments

Recent vessel movements include the Maui Ventspils, which loaded gasoline in Ventspils and discharged it in Singapore on March 18th, chartered by Vitol. The Metro Mistral loaded in Amsterdam and discharged in Karachi on March 14th, chartered by TotalEnergies. The ST Connaught loaded in Amsterdam and discharged in Singapore on March 17th .

The situation remains fluid, with ongoing military actions by the U.S. And Israeli forces against Iran, and retaliatory measures from Iran and its proxies . The potential for further escalation continues to drive volatility in global energy markets.