APPEC: Oil trade complexity to persist even if disrupted flows reverse, say panelists

Global oil flows may eventually return toward established patterns if geopolitical disruptions ease, but the additional layers of shipping, compliance, insurance and financing risk embedded in physical trading are becoming structural, executives from Equinor, Mitsui OSK Lines and SocarTrading said Sept. 8.

Speaking at APPEC 2026 in Singapore, the panelists broadly agreed that price alone no longer determines whether a trade is executable. Supply security must also encompass the availability of acceptable vessels, safe routes, insurance, financing, and suitable replacement grades.

"The arbitrage today is no longer limited to your assumption of rate, your differentials, some structure build-up and numbers," Socar Trading's Chief Trading Officer, Taghi Taghi-Zada, said.

"It has to be a route that is safe, that is insurable, it is compliant," he said, adding that financing banks must also be prepared to accept the transaction before traders assess its economics.

Those requirements lengthen transaction times and generate both lost and new trading opportunities, Taghi-Zada said. They have also complicated price discovery by widening the potential difference between headline market values and the actual delivered cost of a physical barrel.

Deliverable supply constraints

The Middle East conflict had most severely affected sour crude supplies, while quality differences limited refiners' ability to replace disrupted barrels directly, Taghi-Zada said.

Meanwhile, changes in Venezuelan exports and additional volumes from Brazil and Argentina have created new Latin American arbitrage flows. Taghi-Zada said those routes could prove structural, giving receivers additional flexibility in supply quality and reliability.

Similar constraints have emerged in shipping, where MOL's Senior Managing Executive Officer, Tomoaki Ichida, described the current operating environment as "probably the new norm."

Longer and more frequent voyages have altered vessel supply-and-demand balances, while any return to disrupted routes would depend primarily on seafarer safety, Ichida said.

Shipping risk assessments previously focused mainly on physical considerations such as port safety, but geopolitical exposure is now routinely incorporated, he added. Uncertainty over routes and risks has also complicated charter-party negotiations.

Ichida said the number of vessels nominally controlled by a shipowner did not equate to the tonnage available for a particular trade, given geopolitical, regulatory, and operational restrictions.

For Asian countries, including Japan, energy security can therefore no longer be defined solely by securing supply sources, Ichida said. It must also include securing the shipping capacity and logistics needed to deliver those supplies.

Flows could reverse

Despite the additional complexity, Equinor's Global Head of crude, products, and liquids trading, Alex Grant, said oil flows could revert relatively quickly if disrupted routes reopened cleanly.

"I think things would flip back relatively quickly," Grant said, adding that companies remain structured to select the cheapest available barrel.

Commercial pressure to reduce costs could limit how much companies are willing to pay for supply diversification and unused security capacity, leaving governments to play a larger role, he said.

At the same time, Grant said sanctions and repeated disruptions had made global trade flows significantly less efficient, expanding the value available to traders and shipping companies.

Trading profits had tripled "across the board" over the past seven or eight years, Grant said.

"People haven't got three times better at trading in the last seven years," he said, attributing the increase to greater market inefficiency.

Grant cited sanctions on Russian oil as an example. In many cases, their purpose was to increase Russia's costs without removing its barrels from the global market, he said.

"The purpose of the sanctions was not to remove Russian oil from the market. Far from it," Grant said. The measures instead made markets and cargo flows "way more inefficient," he added. Whether the resulting opportunities endure will depend on how effectively markets adapt and on the extent to which further disruptions reshape trade.

Grant also predicted that anticipated investment in additional oil storage would fall short of announcements once its cost became clearer.

With a rough estimate of $150-$200/barrel to build storage, and acquire and hold the oil, Grant calculated that adding 10 days of cover against consumption of around 100 million b/d would involve about 1 billion barrels. At the upper end of his estimate, that would imply a cost of roughly $200 billion.

While some storage would be built, governments would probably also pursue less expensive ways of strengthening energy security, he noted.

Taghi-Zada nevertheless urged market participants to retain the alternative supplies, routes, and logistics developed during recent crises rather than returning entirely to the lowest-cost model once disruptions ease.

"Optionality costs you money, and it doesn't just come with your derivatives contracts," he said. "It has to be part of the bigger picture."