South Korea's S-Oil will earn less per barrel from refining than Japan’s ENEOS in the first quarter of 2027.

On 5 October, Tokyo said it would expand its reinsurance scheme so the government can directly insure tankers carrying crude oil and LNG when private insurers pull back from high-risk routes. That will make Middle Eastern cargoes cheaper for ENEOS and Idemitsu to secure – particularly as shipping through the Strait of Hormuz becomes more expensive for other Asian buyers. S-Oil is especially exposed. Most of its crude comes from Saudi Aramco, its largest shareholder, and passes through the Strait of Hormuz, where insurance now costs 3% to 5% of a ship’s value. South Korea’s state scheme covers only 10 small vessels, while Japanese refiners will have government backing for their cargoes. S-Oil will face higher shipping costs and therefore weaker margins compared to their Japanese counterparts. Asia’s fuel buyers will increasingly split between those with state-backed insurance and those without – putting pressure on Seoul to extend similar cover to large tankers.