Singapore, as Asia's oil hub, is amplifying the regional transmission of the Hormuz shock

Overview

This report analyzes the impact of the prolonged closure of the Strait of Hormuz on Asia's energy supply chain, with a focus on Singapore's transmission role as Asia's largest oil trading hub and a major refining center. Since more than 70% of Singapore's crude oil comes from the Middle East, changes in its refining, inventories, and refined product exports affect multiple Asia-Pacific economies that depend on Singaporean supply. The report believes that the current shock has already been reflected in weaker trade flows and lower refinery operating rates, but refined product inventories have not yet deteriorated significantly, so short-term supply risks still have some buffer.

Core views

The core view is that Singapore is the key conduit for Asia's oil product shock. The impact is not limited to Singapore itself, but may also affect trading partners such as Indonesia, Malaysia, New Zealand, Vietnam, and Australia through the refined product export chain. The two major refineries have already lowered operating levels, and together with declines in oil imports, marine fuel sales, and refined product exports, this indicates that supply pressure has begun to emerge. However, inventories of light distillates, middle distillates, and residual fuels remain relatively stable, implying that the region still has some short-term buffer. For Singapore itself, lower refining output will weigh on second-quarter GDP growth, and the report estimates that reduced refinery utilization could create an annualized growth drag of about 1.5 percentage points.

Analysis framework

The report uses an event-shock analysis framework, treating the closure of the Strait of Hormuz as an exogenous energy supply shock, and evaluates the transmission chain through dimensions such as Singapore's crude sourcing, refinery utilization, import-export flows, inventory coverage days, dependence of major trading partners, and GDP industry weights. Chart data mainly come from ITC Trademap, CEIC, Enterprise Singapore, news reports, and J.P. Morgan estimates.

Methodology notes

• Macro Shock TransmissionEnergy Supply Chain Transmission Analysis

  A chain transmission from blocked crude oil imports to lower refining output, and then to refined product exports and supply risks for trading partners.

  The report views Singapore as a regional oil products hub and analyzes its crude oil imports, refinery utilization, oil product inventories, and export destination dependence to assess how the Hormuz shock could spread across Asian economies.

• Inventory Buffer AnalysisInventory Coverage Days

  Measuring short-term supply resilience by the number of days inventories can cover relative to exports or demand.

  The report estimates that Singapore's inventories of light and middle distillates are about 20-30 days, while residual fuel inventories exceed 50 days, concluding that although inventories are not abundant, they can buffer the supply shock in the short term.

• GDP Impact EstimationLinear Mapping of Refinery Utilization

  Assuming refining industry output changes linearly with refinery utilization, and using the industry's GDP weight to estimate the growth drag.

  The report notes that oil refining accounts for about 1.3% of Singapore's GDP. If refinery utilization declines are reflected linearly in output, this could create an annualized drag of about 1.5 percentage points on second-quarter growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Singapore economy

  Directly affected by the decline in refining, oil product trade, and petrochemical activity.

  Strengths

  As Asia's largest oil products trading hub, it has relatively strong inventories and trade networks, and inventories remain stable in the short term.

  Weaknesses

  Crude sourcing is highly dependent on the Middle East, and refining and oil product trade are sensitive to external supply shocks.

  Comparison

  Compared with most trading partners, Singapore has stronger hub capabilities, but it is also more directly exposed to supply chain disruptions.

  Risks

  Refinery utilization cuts, force majeure at petrochemical companies, and weaker oil product exports may weigh on second-quarter GDP.

• Indonesia, Malaysia, New Zealand, Vietnam, and Australia

  These economies are major destinations for Singapore's petroleum product exports and are highly dependent on Singaporean supply.

  Strengths

  They can obtain some buffer through their own reserves and Singapore's inventories.

  Weaknesses

  Some economies have domestic refining capacity that is relatively low versus demand and insufficient fuel reserves.

  Comparison

  The report believes that some Southern Hemisphere economies, as well as Vietnam and Indonesia, are particularly vulnerable.

  Risks

  If Singapore's refining output continues to decline or inventories are depleted, shortages of specific oil products may emerge.

• Light and middle distillates

  These represent key refined products such as gasoline, naphtha, diesel, and jet fuel, and are important indicators of regional supply pressure.

  Strengths

  Current inventories can cover about 20-30 days, providing a short-term buffer.

  Weaknesses

  Inventory levels are not abundant, and some products such as naphtha may be more prone to shortages.

  Comparison

  Coverage days are lower than for residual fuels.

  Risks

  Continued import constraints and refinery utilization cuts could lead to a rapid decline in inventories.

• Residual fuels

  Part of Singapore's oil product inventories, offering reference value for marine fuel and heavy fuel supply.

  Strengths

  Inventory coverage exceeds 50 days, providing relatively stronger buffer capacity.

  Weaknesses

  They cannot fully substitute for demand for light and middle distillates.

  Comparison

  Inventory coverage duration is significantly longer than that of light and middle distillates.

  Risks

  If the shock continues to widen, even the higher inventories may gradually be consumed.

Key data

• Singapore crude source dependenceOver 70%More than 70% of Singapore's crude oil comes from the Middle East, making it highly sensitive to Hormuz-related supply disruptions.
• Utilization cuts at major refineriesAverage about 30%The two major refineries account for about 80% of Singapore's refining capacity combined and had already reduced operating levels in the early stage of the conflict.
• Change in Singapore oil imports-16%March oil imports fell versus the average level of January-February.
• Change in marine fuel sales-40%The declines in imports and refining have already been reflected in a significant drop in marine fuel sales.
• Change in other refined product exports-13%Exports of other refined products to trading partners also declined, though by less than marine fuel sales.
• Light and middle distillate inventoriesAbout 20-30 daysBased on 2024 export levels, inventories of gasoline, naphtha, diesel, jet fuel, etc. can provide a short-term buffer.
• Residual fuel inventoriesOver 50 daysResidual fuel inventory coverage is longer than that of light and middle distillates.
• Refining industry's share of GDPAbout 1.3%A decline in refining output will directly weigh on Singapore's domestic growth.
• Estimated Q2 growth dragAbout 1.5 percentage points annualizedBased on the assumption of a linear relationship between refinery utilization and refining output.

Impact & implications

For investment and macro assessment, the report suggests that the key observation point for Asia's energy shock is not only crude oil prices, but also refinery utilization, inventories, and export capacity at Singapore, the oil products redistribution hub. If the closure of Hormuz persists and inventories begin to fall, economies that depend on Singapore's refined product supply, lack sufficient domestic refining capacity, and have low fuel reserves may face higher supply risks. For Singapore itself, the downturn in refining and petrochemical-related activity will offset growth momentum from strong tech exports.

Risks

• The closure of the Strait of Hormuz lasts longer than expected, further compressing Middle Eastern crude inflows into Singapore.
• Singapore refineries continue to reduce utilization, causing further declines in refined product exports and marine fuel supply.
• Shortages emerge in individual products such as light distillates or naphtha, even if overall inventories still provide some buffer.
• Economies that depend on Singapore's oil product supply and lack sufficient domestic refining capacity face higher energy shortage risks.
• Force majeure at petrochemical companies expands, creating an additional drag on Singapore's industrial production and GDP.

What to watch

• Whether the Strait of Hormuz reopens and whether Middle Eastern crude transportation recovers.
• Operating rates at Singapore's major refineries, especially the operating levels of ExxonMobil and SRC.
• Monthly changes in Singapore's crude imports, marine fuel sales, and other refined product exports.
• Weekly trends in inventories of light distillates, middle distillates, and residual fuels.
• Fuel inventories and import substitution capacity of trading partners such as Indonesia, Malaysia, New Zealand, Vietnam, and Australia.
• The offsetting relationship between Singapore's second-quarter GDP, industrial production in oil refining, and momentum in tech exports.