[S&P Global] – Asian oil buyers are set to witness significantly more opportunities to import attractively priced crude from the US despite the presidential election outcome, as production in the country grows rapidly while competition with OPEC suppliers intensifies.
However, analysts and trade sources told S&P Global Commodity Insights that changes in Washington’s policies on Iran, Russia, and Venezuela could alter the region’s overall oil inflows.
“The dynamics of oil flows to Asia are unlikely to change significantly in 2025, barring dramatic policy shifts following the US presidential elections,” said Benjamin Tang, head of liquid bulk at S&P Global Commodities at Sea.
“With growth in US crude production and exports, the US will continue to compete with OPEC exporters in Asia, while targeting European refiners and developing new markets in Africa and Latin America,” he said.
CAS data showed that US crude oil exports averaged 3.85 million b/d from January to October, largely unchanged from the previous year. However, exports to Asia during the period fell by about 88,000 b/d, or 5.7%, year on year, as China’s imports of US crude oil plummeted to 155,000 b/d from 305,000 b/d in 2023.
“The decline of flows to Asia has happened due to lower overall Chinese crude imports, increased domestic crude production and a shift toward discounted Iranian crude imports by independent refiners,” Tang said.
The fall was partially offset by increased US crude exports to South Korea, averaging 474,000 b/d in the 10-month period, up 62,000 b/d year on year, due to the country’s crude diversification strategy. US exports to India averaged 161,000 b/d in the first 10 months of the year, an increase of 22,000 b/d year on year.
Window of opportunity
North Asian traders and refiners said a second Donald Trump victory could limit China’s energy trade with the US, potentially providing other major regional buyers of WTI Midland crude, including South Korea, Japan, Taiwan and Thailand, a bigger opportunity to procure additional spot cargoes of light sweet US crudes.
“If another trade war unfolds after the US election and China finds US crude expensive, South Korean refiners could take advantage of lower tariffs due to the South Korea-US free trade agreement to grab more US crude every trading cycle,” a crude trader said.
South Korea has been the most active buyer of US crude in Asia so far this year with 120.889 million barrels in the first eight months. The country is on track to hit record-high annual imports from the US in 2024, according to Commodity Insights’ analysis and Korea National Oil Corp. data.
In addition, Japan could also step up its efforts to reduce its reliance on Middle Eastern crude and procure more volumes from the US.
“Japan relies too much on Middle Eastern suppliers, putting the nation in quite a vulnerable position in case of any Persian Gulf-Asia trade flow disruptions amid ongoing geopolitical tensions in the region,” said a market analyst at a Japanese trading company. “If more US supplies are available in the market — as a result of a potential US-China energy trade slowdown — Japanese refiners may not hesitate to take more.”
Japan, the fourth-largest crude importer in Asia, bought 2.19 million b/d from Persian Gulf suppliers in the first eight months of the year, accounting for more than 96% of the country’s total crude imports during the period, the latest data from the Ministry of Economy, Trade and Industry showed.
In the event of a Kamala Harris victory, Washington’s policy on Iran’s nuclear issue may not change immediately, but Asian crude buyers could be hopeful for a revival in nuclear talks, the North Asian traders said.
“It would be a dream come true if we can resume purchasing South Pars condensate because the Iranian ultra-light crude was an essential feedstock prior to the sanctions,” said a feedstock management source at Hanwha TotalEnergies.
Policy impact
Growing US crude production has posed a significant challenge for OPEC+ in recent years, exerting downward pressure on prices, threatening the bloc’s market share and prompting massive output cuts. Analysts say increased US production, as well as output increases in other non-OPEC+ countries, such as Brazil, Guyana and Canada, have nearly nullified the impact of OPEC+ cuts in 2024.
According to analysts, a second Trump administration might focus on increasing US oil production by rolling back environmental regulations and expanding offshore and federal lands leasing opportunities. In contrast, Harris could maintain the Joe Biden administration’s strategy of reducing emissions while managing oil supplies.
A key area of divergence between Trump and Harris could be their sanctions policies, which have affected crude output in OPEC+ producers Russia, Iran and Venezuela in recent years. After falling during the first Trump administration, production in Iran and Venezuela has recovered under Biden, as the focus of sanctions has shifted to Russia.
“If it gets increasingly difficult for, let’s say, China to buy oil from Iran or Venezuela due to any policy changes by whoever comes to power, the overall trade flow map of Asia could start changing as China will have to look for quite large replacement volumes,” said a regional trade source.
“And of course, Russian crude has expanded its footprint now in both China and India. If there is a change in Washington’s Russia policy, those volumes will be also in the spotlight,” the trade source said.
Analysts said any change in US tariffs could also have significant implications for Asian energy flows.
Tushar Tarun Bansal, senior director at consulting firm Alvarez and Marsal, said US-to-Asia oil flows could also potentially be significantly impacted by any new tariffs imposed by the new US administration or retaliatory tariffs imposed by other countries.
“While US crude could find alternative homes closer to production sites, it is the LNG exports that could have a major impact as there are limited alternative homes at the moment,” Bansal said. “This implies that the effective cost of the tariffs is borne by the producers to a large extent.”
STORY CREDIT: [S&P Global] -Authors: Sambit Mohanty | Gawoon Philip Vahn |
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