Asian refiners consider buying more WTI Midland crude as Chinese demand dips amid tariffs

Asia's regular US crude buyers are keen to add extra WTI Midland barrels to their feedstock basket as China's faltering interest in the light sweet grade may lead to a few VLCCs per month looking for new buyers at discounts in the Asian market, industry and trade sources said over April 8-11.

Many North Asian traders and refiners had anticipated that the Donald Trump administration could instigate another round of trade and tariff disputes with Beijing, ultimately restricting China's energy trade with the US. Consequently, state-run Chinese refiners have expressed a lack of interest in US crude, providing other major regional buyers of WTI Midland cargoes with a greater opportunity to procure additional spot cargoes.

Data from China's General Administration of Customs indicated that Asia's largest crude buyer imported 190,000 b/d of US crude in 2024, amounting to approximately 5.8 million barrels per trading cycle.

This suggests that around three VLCCs/month of US crude may need to find new outlets in the Asian market, presenting a significant opportunity for regular WTI Midland crude buyers across Northeast, Southeast, and South Asia to acquire extra barrels at discounted prices, according to feedstock managers at major refiners in Japan, Thailand, South Korea, and India, as well as traders based in Singapore.

China's crude imports from the US will dry up completely soon after China imposes a first 34% plus another 50% retaliation tariff on all goods imported from the US, refinery and trade sources told Platts April 10.

"The 10% tariff since February, as well as the new 34% plus 50% tariff means [China's] US crude [imports] will be zero soon," said a state refinery source.

Those US crudes can be easily replaced with other grades, likely from the Middle East, according to refinery sources.

In Northeast Asia, at least one South Korean and one Japanese refiner have indicated that they have been given the option to take additional cargoes for late June and July delivery, according to refinery feedstock management sources in Seoul and Tokyo.

"WTI Midland is one of our staple feeds for the main CDUs, and it's possible to accommodate an additional 1 million-3 million barrels per month without making significant alterations to the refinery configuration," said a feedstock management source at a major South Korean refiner.

South Korea was the top buyer of US crude in Asia in 2024, importing 168.43 million barrels, which represents an 18.3% increase from 2023 and marks the highest annual shipments from the North American supplier, according to data from state-run Korea National Oil Corp.

Elsewhere, India's Bharat Petroleum Corp Ltd. recently secured a short-term contract to procure 1 million barrels/month of WTI Midland crude, and the South Asian refiner indicated that it may evaluate cracking economics to purchase additional cargoes from the spot market.

"If any distressed cargoes seek new buyers [due to poor Chinese demand] in the Asian market at lowered prices, it's possible [to buy]," said a feedstock inventory management source at BPCL.

In Southeast Asia, Thailand's state-run PTT declined to comment when asked if any of its regular suppliers had offered additional WTI Midland cargoes. However, a feedstock strategist at the Thai refiner indicated that the recent sharp decline in the Brent-Dubai price spread bodes well for US crude trades, and China's tepid demand could make price differentials attractive.

Thailand ranked as Asia's fifth-largest buyer of US crude in 2024, with the Southeast Asian nation purchasing 40.21 million barrels last year, reflecting a 4.9% increase from 2023, according to Thai customs data.

Feedstock economics

Although China's lack of interest in US crude may present opportunities for others, the ultimate decision to make any additional purchases depends on the US-Persian Gulf crude price spreads and the overall refining economics, according to traders and feedstock managers at Japanese, South Korean, and Thai refiners.

For Japanese refiners that rely heavily on Persian Gulf sour crudes, the recent sharp decline in the Middle Eastern price structure and Saudi Aramco's official selling prices has come as a significant relief. While US crude is essential for supply diversification efforts, WTI Midland must be highly economical to become a substantial part of Japan's crude slate, according to feedstock managers at two Japanese refiners, including ENEOS.

Platts, part of S&P Global Commodity Insights, assessed the spread between WTI Midland and Dubai crude on a DES Yeosu (South Korea) basis at an average premium of $3.64/b to date in April, compared with a first-quarter average of $4.89/b.

Additionally, refiners across Northeast Asia and Southeast Asia indicated that they cannot simply make additional US crude purchases based solely on attractive prices, as their crude throughput and overall run rates are under pressure due to bleak oil demand fundamentals amid global economic growth uncertainties.

Industrial and consumer fuel demand is not looking particularly promising, as global economic activity and trade could slow due to uncertainties surrounding US tariffs, said a feedstock and logistics manager at another major South Korean refiner based in Ulsan. "We are constantly on the lookout for cheap crude cargoes in the spot market, but weak cracks and a tepid economy will limit purchases in the end."