Shifting crude slates at Asia-Pacific refiners are reshaping regional refined-products output, weighing on residual fuel production and potentially leaving secondary units running less efficiently, market participants said.
Asian refiners are scrambling to secure alternative crude feedstocks because access to their regular supplies from the Mideast Gulf was effectively cut off by the US-Iran war, prompting many to look increasingly towards the US for replacement supply.
US light sweet crude has emerged as a leading substitute for Middle Eastern heavy and medium sour grades stuck at or unable to transit the strait of Hormuz. A record 3.5mn b/d of US crude is expected to arrive in Asia-Pacific for June delivery, exceeding the previous record of 2.5mn b/d set just a month ago, according to ship-tracking data from Kpler.
Japan, which relies heavily on Mideast Gulf crude, has become a key buyer of US cargoes. Japanese refiners have so far purchased more than 530,000 b/d of US crude for June delivery, according to Argus deal tracking data, easily surpassing the previous monthly high of 290,000 b/d in December 2025, based on the country's trade and industry ministry figures.
ExxonMobil also bought just over 230,000 b/d of WTI for delivery to its 592,000 b/d Jurong refinery in Singapore in June. The Jurong refinery stopped importing US crude in May last year, after it upgraded residue processing and shifted to a heavier, more sulphurous slate.
Lighter crude appetite
The shift from heavier sour grades to lighter sweet crudes is expected to reduce residual fuel output, with knock-on effects on secondary unit feedstock availability, market participants said. Ironically, complex refiners — designed to upgrade residual fuels into higher-value gasoil and gasoline — may find themselves short of feedstock for secondary units under a lighter crude slate, resulting in lower operational efficiency.
Argus Consulting research on Japanese refineries — which typically operate cracking configurations — shows the crude switch could increase light distillate output while sharply reducing residual fuel oil production. This could leave refiners struggling to source feedstock for hydrocrackers and fluid catalytic crackers, the key units for gasoil and gasoline production.
It remains unclear whether refiners not accustomed to running such light slates will face operational constraints, but the impact may be limited in the near term while run rates remain below normal due to rationed crude supplies, an Argus consultant said.
Some refiners may instead turn to spot purchases of secondary feedstocks such as vacuum gasoil (VGO) and straight-run fuel oil (SRFO), but these options come at elevated costs, according to an Argus survey.
Refiners are seeking to buy VGO and SRFO, but supply is currently tight, a Singapore-based senior fuel oil trader said. It also depends on whether a refinery has a direct injection facility, which allows secondary unit feedstocks to be fed directly into downstream units rather than through the crude distillation unit (CDU), a senior oil analyst said.
Vietnam's Nghi Son Refinery and Petrochemical (NSRP), for example, has made unusual SRFO and VGO purchases due to reduced residual output after switching to lighter crude grades, partly as a result of the US-Iran war. NSRP typically processes medium sour Kuwait Export Crude, but supply disruptions have forced it to source alternative grades — a process that had already begun prior to the conflict — resulting in lower production of heavier products such as fuel oil and VGO.
Market participants warned of a potential double-whammy effect for Asian refiners — crude shortages force lower refinery run rates while mismatched crude slates reduce secondary unit efficiency, ultimately weighing on refined-products output.
