Key Takeaways:
Asian oil buyers are abandoning the Dubai benchmark for ICE Brent after the Middle East marker surged to a record $169.75, upending decades-old pricing conventions.
Asian refiners are switching to ICE Brent to price US crude purchases after the Dubai benchmark surged to an all-time high of $169.75 a barrel this month, three refining and trade sources said Friday.
"The move could reduce liquidity for the Middle East benchmark in the derivatives market as traders shift hedges to ICE Brent," one of the sources said.
Japanese refiner Taiyo Oil bought 2 million barrels of US light crude at about $19 a barrel above ICE Brent for July delivery, the source said. Other Japanese refiners have also purchased US crude priced against Brent instead of Dubai, though details of those deals were not immediately available as they were conducted through private negotiations.
The shift threatens to erode Dubai's role as the primary pricing mechanism for Middle Eastern crude just as the Strait of Hormuz disruption — through which about a fifth of the world's oil normally flows — has made Middle East supply the most expensive globally.
Dubai's spike to a record
Dubai's surge to $169.75 last week pushed it above Brent for the first time, making Middle Eastern crude costlier than supply from the North Sea or the US. The spike followed S&P Global Platts' decision to exclude three of the five crude grades from its Dubai assessment in anticipation of prolonged shipping disruptions via the Strait of Hormuz. Robust demand from French major TotalEnergies has further supported Dubai prices, traders said.
Following the volatility, some Asian refiners have requested that Saudi Aramco, the world's top exporter, change its pricing benchmark to ICE Brent from Platts Dubai, according to traders. Saudi Aramco could not be reached for comment.
Asian buyers scramble for alternatives
Asia depends on the Middle East for about 60 percent of its crude supply, making the region acutely vulnerable to the Hormuz disruption. The near-closure of the strait has forced refiners to cut operating rates and reduce fuel exports.
Indian refiners are preparing to resume Iranian crude imports after the Trump administration on March 20 issued a 30-day waiver allowing purchases of Iranian oil already in transit, three industry sources said. About 170 million barrels of Iranian crude are currently at sea, according to Kpler data, with shipments spread from the Middle East to waters near China.
The US waiver applies to cargo loaded on or before March 20 and delivered by April 19, marking the third such exemption since the conflict began. However, challenges remain around payment channels, compliance requirements, and logistical concerns tied to older vessels in the so-called shadow fleet, traders said.
What's at stake
The benchmark shift carries implications beyond individual cargoes. If Asian refiners permanently adopt Brent pricing for US crude, it could reduce liquidity in Dubai derivatives markets and weaken the Middle East benchmark's relevance in global oil pricing. That would mark a structural change in how a significant portion of the world's crude is valued, potentially benefiting US producers who already supply a growing share of Asian imports.
For now, the immediate driver remains the Strait of Hormuz. With shipping traffic through the chokepoint at a near standstill and no resolution in sight, Asian buyers are likely to continue pivoting toward US and other non-Middle Eastern supply — a shift that, if sustained, could reshape crude pricing dynamics for years.
This article is for informational purposes only and does not constitute investment advice.
