APPEC 2025 Briefing: Asia's Oil Market Faces Three Major Structural Shifts

Introduction

The Asia Pacific Petroleum Conference (APPEC) is a key barometer for the global energy market. On September 10, 2025, Wood Mackenzie analysts shared their assessments of Asia's oil and refining markets at the conference. Against the backdrop of interwoven global energy transition and geopolitics, these assessments provide a critical reference for regional business decisions.

Global Demand Growth Stalls, Price Center of Gravity Shifts Down

In the second quarter of 2025, global liquid fuel demand grew by only 0.3 million barrels per day year-on-year, well below the historical average. Full-year demand growth is expected to be 0.85 million barrels per day, and will slow further in 2026. Notably, petrochemical feedstocks (LPG and naphtha) contributed half of the demand growth in 2025, meaning that transportation fuel demand is being replaced by chemical demand.

On the supply side, non-OPEC producers' output growth in 2025-2026 will outpace demand growth, and with OPEC+ gradually increasing production, the market will enter a sustained surplus, with oil prices expected to remain under pressure from 2026 to the first half of 2027. However, if U.S. secondary sanctions on Russia cause a sharp decline in Russian crude imports by China and India, there is upside risk to oil prices; conversely, if trade frictions escalate or OPEC+ raises production more than expected, oil prices could be lower.

Asian Refineries Deepen Reliance on Crude Imports, Quality Matching Becomes a Core Issue

As Asia becomes the global refining center, its dependence on imported crude continues to rise. Take Indonesia as an example: domestic crude production is declining rapidly, while refining demand keeps climbing, and the import gap has widened significantly. Wood Mackenzie's analysis suggests that Asian refineries will need to import crude from new, long-distance sources to meet specific quality requirements.

For crude producers and traders, understanding the "value" of a crude at a specific refinery is crucial. This value depends on refinery configuration, base crude slate, and refined product prices, while market prices are influenced by multiple factors such as geopolitics, competitive landscape, freight rates, and OPEC+ policy. Wood Mackenzie's PetroPlan simulation tool, built on models of approximately 550 refineries, supports crude valuation trading and refinery optimization.

Structural Product Shortages in the Pacific Region Reshape Trade Flows

The Pacific region is the most economically dynamic area in the world, encompassing China, India, Japan, South Korea, Indonesia, and the U.S. West Coast. Among these, refining capacity in California and Japan struggles to meet local demand, creating structural shortages. It is estimated that California will face a gasoline shortage of 134,000 barrels per day by the end of 2025, which will widen to 206,000 barrels per day by the end of the first quarter of 2026.

This shortage is not a short-term fluctuation, but rather stems from refinery closures, environmental policies, and changes in demand structure. For Asian refiners, the gap across the Pacific represents export opportunities, but they must also address challenges related to logistics costs and product specifications. Trans-Pacific refined product trade flows are being redefined.

ConclusionThe APPEC 2025 briefing revealed a core logic: the global oil market is shifting from "demand-driven" to "supply and efficiency-driven." For Asian enterprises, whether refinery operators or traders, they need to find their place within increasingly refined market segmentation. Understanding regional structural shortages, mastering crude oil quality matching, and anticipating price trends will be key to competitiveness over the next two years.