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Thailand Turn to US and Russian Oil as Hormuz Crisis Disrupts Middle East Supplies

Asia Scramble for US and Russian Oil Amid Hormuz Crisis

As the conflict in the Strait of Hormuz continues to disrupt oil supplies from the Middle East, Thailand and other Asian countries are increasingly turning to alternative sources of crude, including the United States and Russia. This shift in purchasing patterns is pushing US oil exports to Asia to a three-year high while Russian oil is also becoming an important alternative for many nations in the region.

Data from energy consultancy Kpler and ship-tracking platform Vortexa shows that US oil exports to Asia in April are set to reach 60 million barrels, the highest level since April 2023. Thailand, along with countries like China, Japan, and South Korea, is among the largest importers of US crude. However, in addition to US oil, Russia’s discounted crude has also emerged as a key source for Thailand as it seeks to secure reliable energy supplies.

Thailand Faces Energy Pressure Amid Hormuz Disruption

The closure of the Strait of Hormuz, a crucial shipping route for oil from the Persian Gulf, has hit Thailand particularly hard. The country, which traditionally relies on Middle Eastern oil, has been forced to reduce refinery runs and implement fuel export bans in an effort to manage the energy crisis. As a result, Thai refineries are looking to both US and Russian oil to meet their energy needs.

US oil, while in high demand, has become more expensive. Some shipments to Thailand have been priced at premiums of up to US$12-13 per barrel over Brent crude. Despite the higher costs, Thailand has little choice but to secure these alternative supplies to ensure continued energy security.

Russia's Discounted Oil Becomes Key for Thailand

In addition to US oil, Russia has become a significant supplier for Thailand and other Asian countries, offering discounted crude that is particularly attractive as global oil prices rise. With European demand for Russian oil plummeting due to sanctions, Russia has shifted its focus to Asian markets, particularly China, India, and Southeast Asia.

For Thailand, Russian crude provides a cheaper alternative, especially amid the rising costs of US and Middle Eastern oil. Russian oil is typically sold at a discount, making it a more affordable option for Thai refineries. Thailand's growing reliance on Russian oil is part of a broader trend in Asia, where countries are diversifying their oil imports to reduce dependence on any single supplier.

US and Russian Oil Producers Benefit from Rising Demand

US oil producers are benefiting from the surge in Asian demand, with higher prices and a growing export market. Meanwhile, Russian producers are capitalizing on the shift in global trade, as their oil is increasingly seen as a cost-effective solution to the disruptions in the Middle East.

While both US and Russian crude are seeing higher demand, Thailand and other Asian nations face a complex situation. The geopolitical risks of buying oil from Russia—due to the ongoing sanctions—are counterbalanced by the economic necessity of securing affordable energy in a time of crisis.

Shipping and Costs Surge as Demand Rises

The surge in US and Russian oil exports to Asia has also created challenges in the shipping industry. Due to the large volume of oil being transported, vessel bookings have skyrocketed, leading to increased shipping costs. In response, smaller tankers are now being used, as the typical very large crude carriers, which can carry 2 million barrels, are often unavailable for all shipments to Asia.

Thailand's Oil Imports Surge

Thailand’s oil imports from both the US and Russia reflect a broader trend in Asia, where countries are increasingly turning to alternative sources of crude as Middle Eastern oil supplies become unreliable. The US typically exports around 110 million barrels of oil per month, with about one-third heading to Asia. Similarly, Russian oil has become a growing component of Thailand's energy mix, providing a discounted alternative to other sources.

As the situation in the Strait of Hormuz remains volatile, Thailand and its neighbors are likely to continue turning to US and Russian oil to meet their growing energy needs. The country’s growing reliance on both US and Russian crude, however, comes with a mix of challenges—rising costs, geopolitical risks, and supply chain pressures—that will need to be navigated carefully.

With the energy crisis deepening, Thailand's energy strategy will depend on balancing these diverse oil sources to maintain security and stability in its economy.