Asian refiners are shifting crude procurement strategies from margin optimisation towards supply security and flexibility, as geopolitical disruptions expose the risks of relying heavily on a single supply region, industry executives said at the S&P Global Energy APPEC 2026 conference in Singapore today.
The shift is changing how refiners value crude. Buyers are increasingly considering whether a cargo can be delivered reliably, processed efficiently, and remain economic after freight, insurance, and other risks, rather than assessing it solely on purchase price. "The best crude is not always the cheapest crude," said Taejin Kim, vice-president and head of the crude oil business office at SK Trading International. What matters is which crude can reach the firm more reliably, and whether those shipments will still be economic after considering freight and market risk, Kim said.
Supply diversification has also consequently shifted from a competitive advantage to a procurement necessity, said Alejandro P. Gonzalez, commercial leader for supply trading and logistics at Vietnam's Nghi Son Refinery and Petrochemical. "Six months ago, crude procurement was to improve margins," Gonzalez said. "Now supply security is the main driver, with a bit of optimisation of margins taking second place."
The shift has been particularly pronounced among Asian alternative crude refiners, which are seeking sources to reduce their exposure to individual supply regions, he said.
Asian refining economics have historically centred on securing mainly medium-sour crude from the Middle East which aid in maximising margins. The Middle East will remain the region's core supplier, but refiners are increasingly turning to the Atlantic basin to reduce supply risks.
"The Middle East remains the base, but Asian refineries are counting more on Atlantic basin barrels," said Norway's state-owned refiner Equinor vice-president and head of Asia-Pacific Desikan Sundararajan.
US, Latin American and West African grades are becoming more regular components of Asian crude slates rather than remaining purely opportunistic arbitrage shipments. Canadian heavy crude is also attracting strong interest, supported by the Trans Mountain pipeline expansion and declining US west coast demand as regional refining capacity closes.
Japanese refiners, for example, now source more than half of their crude from the US, while Taiyo Oil has increased its own US crude procurement by 20pc since the start of the war, the company's chief executive Takahiro Yamamoto said.
Grade mismatch, margins
But alternative grades can differ substantially from the medium-sour Middle Eastern crude around which many Asian refineries were designed. Lighter US crude and heavier Latin American or Canadian grades cannot necessarily provide direct replacements, potentially requiring refiners to blend multiple crudes while protecting yields and operational stability.
Refining margins are also changing how buyers calculate the cost of supply disruptions. With strong double digit refinery margins observed for most oil products, the opportunity cost of a delayed or missed cargo can outweigh the premium paid for more reliable supply. A failure to secure replacement feedstock could force refiners to reduce runs and forgo substantial margins.
Crude diversification also depends on whether a refinery has experience processing alternative grades. Processing compatibility is therefore also becoming a more important component of crude value. Grades that can be readily blended with other supplies provide greater operational flexibility when regular flows are disrupted.
Strategic petroleum reserves can provide one to three months of supply during a disruption, but genuine diversification requires experience processing alternative grades under normal operating conditions, Yamamoto said.
Refiners must understand how unfamiliar grades affect equipment, yields and plant operations before they are required during a crisis. Failure to test alternative supplies could leave plants exposed to operational problems or unplanned shutdowns if regular crude flows are disrupted.
Refiners are also placing greater value on flexible delivery terms, transport arrangements, and destination clauses. A nominally more expensive cargo could become competitive if it avoids a high-risk route, arrives sooner, or can be redirected to other destinations as market conditions change.
Executives said resilient procurement would require a combination of long-term contracts and spot purchases. Term agreements provide supply certainty, while spot purchases preserve flexibility when crude prices, freight costs and refining economics change. Asian refiners are increasingly considering multi-year agreements, although these must be balanced against spot-market flexibility and a wider range of supply origins, Sundararajan said.
A growing number of bilateral trade agreements are also opening unconventional supply routes. Equinor's recent delivery of a Norwegian LNG cargo to India shows how new trade frameworks can support flows that were previously commercially uncompetitive, Sundararajan said.
Regional governments must meanwhile decide whether to direct funding towards expanding strategic petroleum reserves, which provide an immediate buffer against disruptions, or supporting domestic upstream production to reduce longer-term import dependence.
For Asian refiners, the value of a crude cargo increasingly depends on whether it can be delivered safely, processed efficiently, redirected if necessary and replaced when disrupted, the panel said.
