The latest report from CGS International Securities (Thailand) (CGSI) highlights that to bypass the Strait of Hormuz amid rising geopolitical risks, Murban crude oil—a light crude produced in the UAE—can be exported via the Jebel Dhanna terminal in the Persian Gulf, lowering the risk of disruption or attack.
As per the analysis, Reuters recently noted that Murban crude trading volumes have tripled since mid-June, while its prices via ICE Futures Abu Dhabi (IFAD) spiked to $3.56 per barrel from $1.22 in May. This signals a notable premium increase for July shipments.
Simultaneously, the premium for Labuan crude over Dubai has dropped to $9.8 a barrel for July cargoes, down $1.2 month-on-month, but is anticipated to rebound by $1.5-2.0 a barrel for August due to higher demand from Asian refineries.
Shipping rates for Very Large Crude Carriers (VLCCs) have also climbed to $1.80 per barrel mid-June, from $1.10 earlier in the month. This is expected to further squeeze the gross refining margin (GRM) of Thai refineries.
CGSI analysts stated that Asian diesel crack spreads have risen to $18-19 per barrel, up from $15-16 in early May. This increase is attributed to regional refinery maintenance shutdowns, strong imports by Singapore, and reduced supply from Malaysia.
Meanwhile, China’s diesel exports remained flat at 520,000 barrels per day in May—a year-on-year drop of 51%—as export margins remained negative. However, export volumes from China may bounce in July as Sinopec ramps production after its maintenance shutdown.
High Sulfur Fuel Oil (HSFO), a key simple GRM support product, fell below $2 a barrel this week from a peak of $4.4 in mid-May as crude prices surged. The analyst sees potential for an HSFO price rebound if shipping through the Strait of Hormuz—which is crucial for HSFO imports from Iraq, Saudi Arabia, and Iran to Asia, the US, and Europe—is disrupted, according to Facts Global Energy (FGE).
Looking ahead, CGSI warns that higher Middle Eastern crude premiums linked to ongoing Israel-Iran tensions could begin hitting Thai refiners’ margins in 3Q25, particularly at Star Petroleum Refining Public Company Limited (SET: SPRC) (which uses mostly Murban crude) and Bangchak Corporation Public Company Limited (SET: BCP) (reliant on oil from far eastern countries).
Meanwhile, as refineries around the globe wind down maintenance outages and resume operations, crack spreads from diesel and gasoline production are likely to compress. Still, if a closure of the Strait of Hormuz leads to a supply shortfall, crack spreads for refined products could surge significantly. Any such boost, however, would probably be tempered by higher crude prices.
Following these developments, CGSI maintains an ‘Underweight’ rating on oil and gas stocks, citing lingering demand uncertainty due to U.S. tariffs and foreign policy risks. Share prices in the sector may also fall short if demand disappoints, though escalating geopolitical risk in the Middle East could fuel oil price upside. SPRC remains CGSI’s top pick among Thai refiners.
