Saudi Arabia and Asia Split Over 2027 Term Crude Volumes

With days left to conclude 2027 term-supply negotiations, Asian refiners and Saudi Arabia disagree over one number: whether this year's spot cargoes should count against 2026 term volumes.

The dispute, first reported by Reuters, marks an unusual break in what is normally a routine annual exercise. Asian refiners and Middle Eastern producers negotiate term crude supplies for 2027 on the customary calendar. What has changed is the baseline. The Iran war crippled fixed-term supplies this year, and Middle Eastern exporters turned to increased spot sales to keep crude moving to their most important export destination, Asia.

That shift in delivery method is now the sticking point in the final days of talks on 2027 term sales under fixed volumes.

Why are the 2027 talks different from previous cycles?

Term contracts — annual deals fixing volumes and pricing formulae between Gulf producers and Asian refiners — are normally settled with little friction ahead of the calendar year. This cycle, the negotiation inherits a 2026 market distorted by war-related supply disruptions.

Because producers could not deliver reliably on fixed-term commitments, they substituted spot cargoes. Spot sales sit outside the term framework, but they reached the same refiners through the same terminals. Now that both sides must set 2027 fixed volumes, the accounting question becomes material: does 2026 spot volume count as delivered supply under the 2026 term agreements, or does it stand apart?

The answer determines how much crude refiners are contractually owed — and how much producers must ship — before 2027 volumes even begin.

What does the disagreement change for refiners?

For Asian refiners, the outcome sets their baseline supply security for 2027. If spot cargoes count toward 2026 term volumes, refiners effectively received their full contractual entitlement, and 2027 volumes start from a clean slate. If they do not count, producers owe makeup volumes, which tightens availability just as both sides try to fix next year's levels.

Refiners negotiating now must weigh:

• Whether to accept spot-delivered barrels as term performance for 2026;
• How any makeup liability affects 2027 fixed-volume offers from Gulf exporters;
• The pricing formula for 2027 given a year in which spot, not term, cleared much of the Asian market.

The takeaway for refiners: the spot-versus-term accounting decision will shape their 2027 supply base more than any single price formula in the contract.

What does it change for Saudi Arabia and Gulf producers?

For Saudi Arabia and its Middle Eastern peers, Asia remains the most important export destination, and the term system is the backbone of that relationship. Counting spot sales into 2026 term volumes erases a potential makeup obligation and preserves flexibility gained during the war-driven disruption.

Refusing to count them preserves the principle that term commitments mean fixed barrels — but it creates a delivery overhang that compresses 2027 volumes available for new or expanded contracts.

Either way, producers face a credibility question: refiners signed term deals precisely to avoid depending on spot markets, and 2026 forced exactly that dependence.

What comes next?

The negotiation window is closing. Days remain to conclude 2027 term sales under fixed volumes, and the outcome will signal whether the annual term mechanism absorbed the Iran war shock intact or whether refiners will push for structural changes — shorter terms, volume flexibility, or wider reliance on spot purchasing — in future cycles.

The watch item: whether Riyadh and Asian refiners settle the spot-volume question before the 2027 term deadline passes.