Physical oil trading now governed by compliance layers, say executives

Route safety and financing clearance now precede price in crude arbitrage#

Physical oil trading now requires clearing multiple compliance layers before traders can assess commercial viability, executives from Equinor, Mitsui OSK Lines and SocarTrading reported at APPEC 2026 in Singapore on 8 September. Price differentials and freight rates no longer suffice to determine whether a transaction proceeds. Traders must first confirm route safety, secure vessel availability, obtain insurance coverage and receive bank financing approval before evaluating the economics of moving a physical barrel.

Taghi Taghi-Zada, Chief Trading Officer at Socar Trading, said arbitrage calculations now incorporate route safety, insurability and compliance alongside traditional spread analysis. Banks must agree to finance the transaction before traders assess its profitability, he stated. These additional steps extend transaction timelines and create a wider gap between published market prices and the actual cost of delivering crude to a buyer.

Middle East disruption shifts Latin American crude flows into structural role#

Sour crude availability from the Middle East has faced the most severe constraints, while quality mismatches prevent refiners from substituting disrupted barrels on a one-to-one basis, Taghi-Zada said. Export changes from Venezuela combined with increased output from Brazil and Argentina have opened new arbitrage opportunities from Latin America. These flows may become permanent features of the market, offering buyers greater flexibility in both crude quality and supply reliability, he added.

Tomoaki Ichida, Senior Managing Executive Officer at MOL, characterized current shipping conditions as likely permanent rather than temporary. Voyage distances have increased and vessel utilization patterns have shifted, altering the balance between tanker supply and demand. Whether disrupted routes reopen depends chiefly on whether seafarers can operate safely, Ichida said. Risk assessments that once focused on port infrastructure now routinely incorporate geopolitical factors, he noted.

Nominal fleet size diverges from available tonnage for specific trades#

A shipowner's total vessel count no longer reflects the capacity available for any given route, Ichida said, citing geopolitical restrictions, regulatory constraints and operational limitations. Energy security for Asian nations including Japan must therefore encompass not only supply sources but also the shipping capacity and logistics infrastructure required to deliver those supplies, he stated.

Alex Grant, Global Head of crude, products and liquids trading at Equinor, said flows could reverse quickly if disrupted routes reopened without incident, as companies retain the structure to select the lowest-cost barrel. However, commercial pressure to minimize costs may limit how much firms will pay for supply diversification or unused security capacity, leaving governments to assume a larger role in maintaining that buffer, Grant said.

Brent approaches $100 threshold as Hormuz attacks continue#

Brent crude prices are approaching $100 per barrel more than six months after the US-Iran conflict began, Bloomberg reported on 7 September. Additional vessel attacks in the Strait of Hormuz are threatening further recovery in transit volumes, while diesel markets face acute supply tightness. Uncertainty around Chinese demand continues to complicate global forecasts, the report stated.