Oil Producers Cut Output and Restrict Exports as ‘Energy Protectionism’ Spreads

As the war in the Middle East shows signs of dragging on, oil-producing countries are cutting output and restricting exports of refined products, heightening tensions in the global energy supply chain. With many governments prioritizing domestic supply under the banner of "energy security," there is growing concern that these moves could spill over to South Korea, which is highly dependent on energy imports.
According to industry sources on the 8th, the State of Kuwait, the fifth-largest oil-producing country in the Organization of the Petroleum Exporting Countries (OPEC), has begun cutting production. The decision came after tanker operations were disrupted by the closure of the Strait of Hormuz, leading to a shortage of crude storage capacity. Iraq had already implemented a production cut of 1.5 million barrels per day for the same reason: insufficient storage space for crude oil.
While oil-producing countries are managing supply by adjusting output, major refining nations in Asia are moving to secure domestic supplies by restricting exports of refined petroleum products.
On the 5th, the government of China notified its domestic refiners to suspend exports of petroleum products. This followed Thailand’s announcement on the 1st that it would halt exports of refined products, and India is also reportedly considering export restrictions in earnest.
Industry observers believe that, as concerns grow over a prolonged closure of the Strait of Hormuz and the resulting uncertainty in crude oil supplies, countries are responding by putting the stability of domestic energy supply and price control ahead of all else.
Financial markets are reacting immediately. Futures prices for Murban crude oil from the United Arab Emirates (UAE), which traded at 50 to 60 dollars per barrel early this year, have now climbed to nearly 95 dollars. If the crisis in the Strait of Hormuz continues, Murban crude oil futures are expected to surpass 100 dollars per barrel in the near future.
The surge in energy prices is also roiling the raw materials market. Aluminum prices, which are highly sensitive to electricity costs, are soaring. Aluminum smelting is a representative energy-intensive industry in which electricity bills account for a large share of production costs, so higher energy prices almost inevitably translate into higher production costs and selling prices. On the 4th (local time), three-month aluminum futures on the London Metal Exchange (LME) jumped as much as 5.1% during intraday trading to 3,418 dollars per ton, the highest level since April 2022. Fears are growing that instability in energy supply could feed through into higher prices for industrial raw materials.
South Korea’s refining industry, which exports more than half of its total output, is closely monitoring the situation. Any disruption to crude oil imports could lead to lower refinery operating rates and reduced product supply.
Lee Tae-ui, a director at the Korea Energy Economics Institute, said, "Export restrictions on refined products are a typical short-term response that appears when geopolitical tensions rise." He added, "Recently, energy is increasingly being viewed as a security asset, which raises the risk that measures such as resource nationalism and export controls will be used more frequently and more readily than in the past." He went on to say, "In the short term, South Korea can respond by tapping its strategic oil reserves, but in the longer term it needs to diversify its import sources and establish a strategy for stable resource acquisition."
aber@fnnews.com Reporter Park Ji-young Reporter