Is the Middle East benchmark distorted? Asian refineries are abandoning Dubai oil prices and switching to Brent pricing for U.S. crude oil.

Ask AI · How would Middle East refiners’ shift to Brent pricing reshape the global crude oil market?

A historic surge in Middle East benchmark crude prices is reshaping Asian crude oil trade patterns. After Dubai crude prices hit a record high of about $170 per barrel and surpassed Brent in one fell swoop, Asian refiners have begun switching the pricing benchmark for U.S. crude purchases from Dubai to ICE Brent. At the same time, the Japanese government has stepped in, urging domestic wholesalers to follow suit with the conversion of their pricing benchmark in order to curb further increases in gasoline prices.

On March 27, Reuters reported that three refinery and trading sources said that Asian buyers only just started placing bookings for U.S. crude cargoes for July delivery this week; multiple Japanese refiners have completed purchase transactions priced off Brent as the benchmark. Meanwhile, Japan’s Ministry of Economy, Trade and Industry (METI) has issued administrative guidance to domestic wholesalers, requiring them to switch to the Brent benchmark when setting gasoline prices, replacing the Dubai benchmark.

This string of moves could disrupt liquidity in the derivatives market for Middle East benchmark crude prices and further intensify the fragmentation of global crude benchmark systems. For Asian buyers that are highly dependent on Middle East crude supplies, switching the pricing benchmark is not only a stopgap response to abnormal price volatility, but may also put long-term pressure on pricing mechanisms of major suppliers such as Saudi Aramco.

Dubai sets a record far above Brent

Dubai crude surged last week to a historic high of $169.75 per barrel, surpassing Brent crude and making Middle East crude the most expensive oil globally.

The report said that the immediate trigger for the price dislocation was S&P Global Platts excluding three of five crude grades related to the Strait of Hormuz from consideration, in response to expectations that the key shipping chokepoint could face long-term disruption—leading to a sharp drop in the amount of crude available for trading. Meanwhile, strong demand from French energy major TotalEnergies also supported Dubai prices.

At present, Brent crude futures are priced at roughly $103 per barrel, far below the Dubai benchmark; the spread between the two provides a clear economic incentive for Asian buyers to shift to Brent pricing.

Asian refiners accelerate the switch, Saudi Aramco faces pressure

Reuters reported that Japanese refiner Taiyo Oil this week bought 2 million barrels of U.S. light crude via tender, with a July delivery window, priced at about $19 per barrel over ICE Brent. The company typically buys WTI crude using Dubai as its benchmark; this benchmark switch is therefore significant.

Quoting sources, the report said other Japanese refiners have also completed purchases of U.S. crude priced off Brent. Those deals were reached through private negotiations, and the details have not been disclosed.

Against a backdrop of intense market volatility, some Asian refiners have asked Saudi Aramco, the world’s largest crude oil exporter, to switch its official pricing benchmark from Platts Dubai to ICE Brent.

Rare government intervention from Japan, administrative guidance drives the benchmark shift

According to a Reuters-seen document, Japan’s Ministry of Economy, Trade and Industry has required domestic wholesalers to use the Brent benchmark when setting gasoline prices. The document noted that because Brent prices are lower than Dubai’s, switching the pricing benchmark would help limit the rise in gasoline prices, and advised wholesalers to continue using Brent pricing going forward.

Such administrative guidance is not legally binding, but Japanese companies typically comply. This month, Japanese gasoline prices have broken through 190 yen per liter (about $1.19), a record high, forcing the government to roll out subsidy measures.

On the supply side, Japan began drawing on private petroleum inventories on March 16 and activated a national reserve as well as a joint reserve held together with three Gulf oil-producing countries on March 26. Japanese Prime Minister Sanae Takahashi, in talks this week in Tokyo with Fatih Birol, head of the International Energy Agency, also discussed additional coordination for releasing oil reserves.

The supply crisis ripples across Asia, as multiple countries seek Japan’s support

The document also showed that this supply crisis has broad impacts across Asia; Vietnam, Indonesia, and India have all sought support from Japan.

Specifically, Vietnam has requested crude for its Nghi Son refinery, which is co-owned by Idemitsu Kosan; India is exploring arrangements to swap liquefied petroleum gas (LPG) for naphtha and crude with Inpex; and Indonesia also wants to procure LPG from Inpex. Inpex, Japan’s largest refiner and wholesaler Eneos Holdings, and Cosmo Energy Holdings all declined to comment, and Idemitsu Kosan did not respond in time to the request for comment.

The Ministry of Economy, Trade and Industry said that, affected by the surge in oil prices after the outbreak of the Middle East conflict, Japanese companies’ current average crude purchase prices have reached $140 to $200 per barrel. With more than 90% of Japan’s oil dependent on Middle East supplies, this supply disruption poses a severe test to its energy security.