Gulf Oil Giants Push to Expand Overseas Stockpiles as Iran War Drags On

Middle Eastern energy giants are scrambling to move more oil into stockpiles safely beyond the turbulent Persian Gulf region, as a prolonged conflict forces exporters and their biggest customers to rethink how to safeguard supplies.

Saudi Arabia and the United Arab Emirates have urged Japan to expand reserves in Japanese tanks by as much as ten times the roughly 8 million barrels each now holds, according to three people familiar with the discussions, who asked not to be identified because the talks are private.

Officials with Saudi Arabia and the Emirates are having similar discussions about expanding their oil stockpiles in South Korea as well, two of the people said.

For the Gulf exporters, which store much of their oil in the region, warehousing more crude abroad offers protection against maritime chokepoints that have become increasingly precarious, from Houthi attacks in the Red Sea to a Strait of Hormuz that shows little sign of opening. Saudi Arabia and the Emirates both have overland pipelines that bypass the strait and enable them to continue exporting limited amounts of oil.

For Asian nations, the world’s largest consumers of Middle Eastern crude, bigger stockpiles would provide an additional buffer against prolonged supply disruptions. At the same time, allocating significantly more tank capacity to foreign oil companies reduces the available space for domestic refiners’ commercial inventories and Japan’s own national reserves.

The volumes being sought by Middle Eastern producers would probably exceed Japan’s available tank capacity and face other logistical constraints, the people said. Talks are continuing over how much oil could ultimately be stored and how the costs would be shared, but the joint stockpiles are expected to increase substantially, they said.

A spokeswoman for Japan’s economy ministry declined to comment on the details of discussions with Saudi Arabia and the Emirates, but said Japan was working with Middle Eastern countries to enhance energy resilience.

A spokesperson for the Abu Dhabi National Oil Company, the Emirati state energy giant, said in a statement: “We look forward to building on our role as a reliable supplier to Asian markets, ensuring stable flows of energy to support market stability and keep prices in check.”

Officials from South Korea and Saudi Arabia did not immediately respond to requests for comment.

The push to relocate oil reserves is one of several fundamental shifts reshaping global energy markets nearly six months into the United States’ war with Iran. Just as the oil shocks of the 1970s prompted governments to build strategic reserves and accelerated a drive toward more energy-efficient cars and factories, today’s crisis is forcing countries and companies to rewire supply networks.

Across the Middle East, producers are building or expanding pipelines designed to bypass the Strait of Hormuz. Major importers, meanwhile, are racing to secure more oil and gas from outside the region while accelerating investment in domestic energy sources, including renewables.

In the early months of the war, hopes repeatedly surfaced that the Strait of Hormuz might soon reopen, said Tatsuya Terazawa, head of the Institute of Energy Economics, Japan, a think tank.

“But at this point, we cannot rely on hope that President Trump will fix this,” Mr. Terazawa said. Asia and the Middle East, the two regions with the greatest economic exposure to the crisis, “need to find ways to deal with vulnerabilities on our own.”

Japan already has a long history of storing foreign-owned crude from Saudi Arabia, the Emirates and Kuwait. As domestic oil consumption has declined from its peak in the 2000s, Japanese storage facilities have had more spare capacity available to lease to overseas producers.

The arrangements give Middle Eastern state energy companies a commercial export hub close to major East Asian customers. For Japan, an island nation that imports virtually all its fossil fuels and gets more than 90 percent of its crude from the Middle East, the setup provides preferential access to the stored oil during severe supply emergencies.

The Emirates began storing crude in Japan in 2009, followed by Saudi Aramco in Okinawa in 2010 and Kuwait in 2020. The agreements have provided Japan with emergency buffers of roughly 8 million barrels each from Saudi Arabia and the Emirates, along with 3 million barrels from Kuwait. Japan tapped those reserves, equivalent to about six days of demand, during the early months of the current conflict.

The push for larger stockpiles gained momentum after Ryosei Akazawa, Japan’s economy minister, visited the Emirates and Saudi Arabia in early May. Later that month, the Emirates dispatched a tanker to replenish depleted stocks.

The model could now spread more widely across Asia.

Southeast Asian economies heavily dependent on Middle Eastern crude have been hit particularly hard by supply disruptions, and countries including the Philippines are pushing to establish national oil reserves. But building strategic stockpiles can cost hundreds of millions of dollars, putting them out of reach for many developing economies.

Agreements in which governments and producers share storage costs could offer an alternative, Mr. Terazawa said. The acute sense of vulnerability in both Asia and the Middle East makes this an opportune moment to expand such agreements, he said.

From an energy security perspective, “it would be a win-win kind of solution” and “some kind of possible silver lining from this crisis,” Mr. Terazawa said.

Kiuko Notoya contributed reporting.

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