Saudi, UAE join Japan-led push to bolster Asian oil buffers

Saudi Arabia and the United Arab Emirates will support a Japanese initiative to bolster oil supplies in Southeast Asia after war-driven disruptions heightened concerns over energy security.

Officials from Saudi Arabia and the UAE joined a special session of the Asia Zero Emission Community on Thursday. Ministers from AZEC’s 11 partner nations — including Japan, Indonesia and Australia — gathered in Manila to discuss cooperation on oil purchases and strategic stockpiles. The framework was launched by Japan to promote regional collaboration on energy transition and security.

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“Both countries from the Middle East expressed their willingness to cooperate on strengthening oil stockpiling capacity in Asia,” Japan’s State Minister of Economy, Trade and Industry Takagi Kei told reporters in Manila. “We will further deepen our cooperation to strengthen energy security.”

The members adopted AZEC’s ministerial work program to strengthen oil stockpiling and build participating countries’ capacity to respond to potential supply shocks.

In April, Japan announced $10 billion of financial support for Southeast Asian nations struggling with soaring crude prices and supply disruptions from the Middle East war. Prime Minister Sanae Takaichi’s initiative includes assistance for oil procurement, storage and emergency reserves aimed at strengthening the region’s ability to withstand future shocks.

Asia bore the brunt of disruptions after the US-Iran war started in late February. The conflict exposed a longstanding vulnerability for Southeast Asia, which relies heavily on imported oil. Before the conflict, more than half of the region’s crude imports came from Persian Gulf producers, while Japan sourced about 90% of its oil from the region, bulk of which passed through the Strait of Hormuz.

The closure of Hormuz sent costs soaring, caused severe shortages and forced some refiners to cut processing and governments to ration fuel supplies, prompting policymakers to reassess energy-security strategies.

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“The recent disruptions in global energy markets, particularly at the critical choke point of the Strait of Hormuz, have reinforced the importance of strengthening our collective preparedness against energy supply shocks,” Sharon Garin, Philippines’ energy secretary said at a joint briefing with Takagi.

The vulnerability remains. Oil reserves across much of the Association of Southeast Asian Nations are still relatively thin, while crude prices above $100 a barrel have made rebuilding stockpiles expensive.

The proposed framework could allow buying countries to negotiate bilateral supply arrangements with Middle Eastern producers. Such deals will also benefit Persian Gulf suppliers by positioning more of their crude closer to Asian customers.