VINACHEM

The imposition of tariffs on Asian energy consumers, the slow pace of China's oil stock build, growing concerns around energy security and the different pathways Asia is pursuing to electrify transport and decarbonize shipping are set to dominate the four-day APPEC conference starting in Singapore Sept. 8.

Hundreds of delegates, including CEOs, government officials and market experts, attending the conference by S&P Global Commodity Insights will also focus on the outlook for global oil balances amid the supply strategy of OPEC+ and non-OPEC producers, the fallout from the latest round of EU sanctions aimed at Russia, and efforts undertaken by Asia to adhere to stricter climate-related goals.

"It's tariffs, tariffs and tariffs -- and its impact on regional and global economies as well as commodities and energy markets. All eyes are also on developments around oil balances, trade routes and supply chains, and their impact on China and India, the key growth centers in Asia," said Vera Blei, head of market reporting and trading solutions at Commodity Insights.

"For the near term, the focus is around Middle East tensions, the Russia-Ukraine conflict, changing trade routes, as well as the latest EU sanctions and how that is being augmented by tariffs," she added.

For sure, Asian oil markets have a lot to digest. But despite that, oil trade flows have been largely resilient and there are reasons for that. The Middle East conflict has largely been contained without spillover to crude suppliers. Sanctions on Russia were aimed at reducing revenues for Moscow rather than efforts to cut supplies to global markets. And the US tariffs have, so far, not substantially disrupted the global economy in a major way, according to analysts at Commodity Insights.

Resilient supplies

Delegates attending APPEC believe that even if geopolitics takes an ugly turn, it may not be able to overshadow the impact of fast-growing global supplies amid relatively slower demand.

Commodity Insights forecasts that rising crude oil production, modest demand growth and a slower pace of stock building in China will lead to a greater supply surplus and bring Dated Brent prices below $60 before the end of 2025.

And in 2026, a higher inventory level and plentiful supply mean prices will struggle to average above $60/b. Currently, the 2026 annual average price for Dated Brent stands at $56/b, but upside risks could push prices above $70/b.

"Amid economic threats and dizzying changes to tariffs by the US, keep in mind that US President Donald Trump also wants low oil prices," said Premasish Das, executive director for oil analytics at Commodity Insights. "Crude supply from both OPEC+ and outside of OPEC+ continues to rise, but US output is still on track to decline in 2026. The pace of global crude oil supply growth is much higher than crude oil demand growth."

On Sept. 7, OPEC+ agreed to increase output by 137,000 b/d in October as a group of key producers within the bloc signaled they would begin unwinding a second tranche of 1.65 million b/d in production cuts.

The group of eight, covering Saudi Arabia, the UAE, Iraq, Algeria, Kuwait, Russia, Kazakhstan and Oman, has already agreed to unwind 2.2 million b/d of voluntary cuts by the end of September, one year ahead of schedule, in what many analysts have interpreted as an effort to claw back market share.

Asian refiners have welcomed the OPEC+ decision to gradually raise output. However, they are looking to avoid an over-reliance on Middle Eastern supply, focusing on diversification to maximize refining margins and minimize logistical risks. The general view is that a ceasefire in the Middle East does not mean the conflict is over.

"We have seen WAF and American crude grades coming economical in our system on a regular basis, wherein the share of Americas and Africa is now more than 20% in our import basket. Indian Oil Corp. leverages on a techno-economically competitive and diversified crude sourcing strategy to access emerging suppliers such as Guyana, Mexico, Colombia and Brazil," Indian Oil Chairman Arvinder Singh Sahney told Platts in an interview ahead of APPEC.

South Korea's robust US crude imports

In addition, tariffs have shifted the focus of Asia's oil buying road map, and APPEC delegates will gather insights on how regional buyers navigate these changes. To mitigate the impact of US tariffs ranging from 25% to 50%, Japan, South Korea, Indonesia, Thailand, and India are pursuing diplomatic efforts to negotiate favorable terms with Washington.

Spotlight on China, India
Another key focus area for APPEC delegates is how China's oil buying pattern might shape up in the foreseeable future. It is becoming increasingly clear that a modest pace of stock building in China would help keep the market subdued for the rest of the year.

Asia's top oil consumer imported 11.29 million b/d of crude in January-July, up 3.2%, or 355,000 b/d, from the low base of 10.94 million b/d in the same period of 2024, data released by China's customs data showed Aug. 7.

In the absence of any buying for its strategic petroleum reserves, Commodity Insights expects China's crude imports to slow to about 11.05 million b/d over August-December from 11.23 million b/d in the same period of 2024. The slowdown could depress oil markets even further.

"Asia has become the center of oil geopolitics and what Asian oil buyers do in terms of diversifying their energy needs will have implications for global energy supply chains," said Rahul Kapoor, head of shipping analytics at Commodity Insights.

"Interesting dynamics are in play for global oil flows in the coming months as the US pressures India to reduce Russian oil imports. If India reduces Russian crude purchases, Russia will need to find other buyers, which is not easy due to Western sanctions. Russia -- any change to Indian oil flows would effectively redraw the map for millions of barrels of oil," he added.

Russia's seaborne oil exports increased slightly in August, as fewer cargoes to India were compensated by a rise in deliveries to China. Russian-origin crude liftings from Russian ports reached 3.40 million b/d for August, up from 3.35 million b/d in July, but still below March-June levels, S&P Global Commodities at Sea data showed. Deliveries to China rose 12% from July's level to 1.109 million b/d in August, while shipments to India fell 21% month over month to 1.3 million b/d.

Delegates and speakers also added that the worsening geopolitical situation and global shipping disruptions are fueling concerns around energy security in Asia, which is largely dependent on imported energy for the bulk of its needs. These developments are making it a challenge for Asian policymakers to accelerate policies around clean fuels.

"Around the world countries and consumers are simultaneously navigating energy addition and energy transition, which means more energy but less emissions. Asia-Pacific will be central to creating this multi-fuel and multi-technological roadmap for the future energy system," said Atul Arya, chief energy strategist at Commodity Insights.