How Poland’s Orlen kept supplies flowing during the Middle East war

Hello and welcome to Energy Source, coming to you from London.

The latest exchange of attacks between Iran and Israel has underscored the fragility of the ceasefire, more than 100 days after Israel’s initial strike and the effective closure of the Strait of Hormuz, a vital route for global energy shipments.

The two sides appear to have paused military operations following calls by US President Donald Trump for a halt to hostilities. But tensions remain high. Explosions were heard in central Tehran on Monday morning, hours after Iran launched missiles at northern Israel in retaliation for an Israeli strike on southern Beirut targeting the Iran-backed militant group Hizbollah.

Against this backdrop, Opec+ agreed to raise its production target by 188,000 barrels a day in July, its fourth consecutive monthly increase since the conflict began. Yet the move is unlikely to result in significantly higher supplies while shipping through the strait remains heavily restricted.

In today’s newsletter, we examine how a European refiner is adapting to the latest energy crisis and how lessons learned from the 2022 shock have given them an edge over Asian rivals.

Thanks for reading, Ryohtaroh

How Orlen’s head trader kept supplies flowing during the Middle East war

In the first few weeks after the Strait of Hormuz was in effect closed in late February, Łukasz Strupczewski, head of crude oil trading at Poland’s state-backed refiner Orlen, was constantly on the phone arranging shipments to the company’s refineries.

Strupczewski would follow his five-year-old daughter through the neighbourhood as she rode her bicycle in the early evening, holding his phone in one hand as he negotiated with oil producers and traders for “some barrels”.

In the most intense weeks, he would sleep only a few hours a night as his team sought to prevent any interruption to Orlen’s crude supplies.

Strupczewski, who has nearly two decades of experience in crude trading, said the company had been able to keep fuel flowing largely because of the changes it made after Russia’s full-scale invasion of Ukraine in 2022.

Orlen had gradually reduced its reliance on Russian crude and expanded direct supply agreements with Saudi Arabia and other producers — a shift that proved a “game changer” for the company as the industry was “jumping from one crisis to another”, he told Energy Source.

Crude grades differ in their chemical properties according to where they are produced, while many eastern European refineries were often configured to maximise output from Russian oil. Russian crude typically contains more heavy residuals and is more “sour”, with a higher sulphur content, requiring more complex facilities to produce cleaner products such as diesel.

After turning away from its neighbouring supplier, Orlen invested in upgrading its refineries and testing new blending recipes. The work allowed it to process a wider range of Middle Eastern and other crude grades without sacrificing as much output.

“We are taking samples of crude from all over the world, trying to find something which can be a good substitution,” he said. “And that was a very positive experience we can put into daily use throughout the crisis.”

That knowledge gave the company a one or two week head start over competitors in securing alternative supplies after the disruption to Hormuz, Strupczewski said. After the strait’s closure, which accounts for one-fifth of the seaborne oil transits, Asian traders rushed to secure alternative crudes, increasing competition.

While rival refiners were assessing which replacement grades their plants could handle, Orlen had laboratory data and operational experience to draw on.

For example, even if the ideal blend of crude A and B was unavailable because of supply disruption, “if you can take A and C, that’s pretty much OK, because we either tried it in the past or, from laboratory tests, we have very positive and promising results”, Strupczewski said.

“Sometimes, when other people were still considering, ‘Is it working or not?’, we were good to go.”

Strupczewski’s team worked around the clock to line up cargoes, adjusting schedules almost hourly to ensure crude continued arriving at Orlen’s refineries.

At times, the company switched cargoes between vessels already in transit, trading one tanker load for another and paying premiums to ensure that the right crude arrived at the right refinery at the required time.

Orlen also prepared a substitution plan for each contract. The options included bringing forward deliveries under long-term agreements, buying additional crude on the spot market and changing refinery blends if a scheduled cargo was delayed.

Strupczewski said Poland had avoided a severe fuel shortage partly because it retained relatively strong refining capacity, in contrast with western Europe, where capacity has been cut for years.

But he warned trading expertise could compensate for physical constraints only up to a point.

Refiners that do not have their own oil wells or stable long-term contracts with large producers will always have to seek barrels on the market, he said.

But companies would eventually reach the point where they could no longer “buy better” or improve their market intelligence, because “there is something like a ceiling” to what can be achieved without owning a reliable source of the commodity, he argued.

Orlen has increased the share of crude it buys directly from producers, reducing its reliance on the spot market and contracts arranged through intermediaries — relationships that Strupczewski said were particularly important during a crisis.

“The best answer,” he said, “is to buy less of those things you are not producing yourself.”

Power Points

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Rachel Millard, Malcolm Moore, Ryohtaroh Satoh and Stephanie Findlay with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.