Middle East oil "flood" is coming! After three rounds of panic buying, Asian refiners can't handle it anymore. International oil giants and traders absorb excess supply.

Asian refiners' demand for Middle Eastern crude oil is starting to slow down after a buying frenzy over the past three weeks, with international oil giants and traders stepping in to take on some of the excess supply. According to traders familiar with the matter, Asian refiners have reduced their purchases from the Abu Dhabi National Oil Company (Adnoc) after three consecutive rounds of tenders, and a similar trend is expected to be seen in the fourth round of tenders ending this week. They added that international oil giants and trading companies, including Shell and Mercuria Energy Group, have purchased more crude oil. It is reported that Adnoc has sold approximately 60 million barrels of crude oil in the first three rounds of tenders, with most of it set to be delivered by ship between June and August, heading towards the Asian market. The crude oil sold in this round is all loaded in the Persian Gulf region, but buyers can also extract the goods by ship-to-ship transfer outside the Strait of Hormuz. The traders mentioned that some of the crude oil sold in the latest round of tenders by Adnoc is expected to flow towards the European market. This continues a recent trend - as Asian buyers reduce purchases, a wave of Middle Eastern crude is flowing to Europe. Earlier, in order to make up for the interruption in Middle Eastern crude oil supply, Asian refiners had scrambled to purchase alternative sources and had already prepared sufficient supply for this month and the following month. Meanwhile, refiners have also reduced processing loads due to high oil prices dampening fuel demand. This situation is in stark contrast to the beginning of the outbreak of hostilities in the Middle East - at that time, the market was widely warned of a possible serious supply shortage. Traders indicate that the large scale of the oil supply from the Persian Gulf has prompted Asian refiners to consider storing oil in operational storage tanks or increasing refinery processing loads to digest the additional supply. Traders point out that currently, the costs of shipping are still high, making the use of tankers for floating storage uneconomical, but countries with onshore storage facilities should be able to more easily absorb these excess crude oil supplies. Traders added that since most refiners have completed their purchasing plans for this month and the next, if further buying is to be stimulated, the crude oil available for sale must be offered at significant discounts. In addition, Adnoc also requires customers with long-term contracts to immediately resume deliveries, which also squeezes demand in the spot market. As signals of progress in ending the war between the United States and Iran are released, more and more vessels are opening satellite signals through the critical waterway of the Strait of Hormuz, indicating an increase in owners' confidence. The International Maritime Organization (IMO) also stated that security arrangements have been received, allowing hundreds of ships to leave the Persian Gulf. There has been a slight increase in the number of vessels passing through the Strait of Hormuz over the past week, although it is still significantly below the pre-conflict average of about 135 ships per day. According to data from the Maritime Traffic website MarineTraffic, there was a noticeable increase in activity in the Strait of Hormuz from June 19 to 21, with a total of 71 transits, reaching a peak of 35 transits in a single day on June 20. Oil-producing countries in the Persian Gulf, including the United Arab Emirates, are rapidly resuming exports. According to data from the International Energy Agency (IEA), UAE oil production has already recovered to nearly 85% of pre-war levels, highlighting the region's rapid supply capacity improvement. Kuwait has withdrawn its force majeure declaration, while Iraq is also increasing production. With the rapid recovery of supply, the result is a significant drop in Middle Eastern crude oil prices. The forward curves for the two major benchmark crude oils in the region - Dubai crude and Murban crude - have now switched to a bearish "contango market" structure. The temporary waiver of restrictions on purchasing some Iranian crude oil by the United States has further increased market supply options. As part of the diplomatic process, the US temporarily lifted sanctions on Iranian crude oil after the first round of high-level talks held under the framework of the US-Iran understanding memorandum. The US Treasury Department issued a 60-day general license allowing for the production, delivery, and sale of Iranian crude oil, valid until August 21, 2026. However, due to complex issues still present in financing and insurance arrangements, the risk of purchasing Iranian crude oil may still be too high for some refiners.