While the world seems focussed on crude supply through Strait of Hormuz, it is the refined products situation which warrants immediate attention from policy makers. While crude supplies are still manageable through alternate supply routes, refined product’s supply chain is far more damaged than crude. Low diesel inventories, the ongoing outage at the Jazan refinery in Saudi Arabia, the extension of Russia’s diesel and gasoline export ban until the end of January 2027 & the fall in output from Chinese refineries are all pointing towards a higher for longer prices for refined crude products. China's June jet fuel exports plunged 64%, with gasoline exports down more than 90% during the same period. Russia's estimated 2025 oil refining capacity stood at around 5.4 million barrels a day (bpd) but now hovers around 3.8 mbpd in June'26 due to Ukranian attacks on Russian oil infrastructure. OECD commercial diesel stocks are 11% below seasonal norms a level typically associated with non-linear price responses. Globally, high-frequency visible refined products stocks are still low across major storage hubs: Fujairah (-62% YoY), Amsterdam-Rotterdam-Antwerp (-23% YoY) and Singapore (-14% YoY). Falling diesel exports from the Mideast and Russia have tightened the market so much that European diesel wholesale margin are at an all-time high of $65/bbl. Refiners in the Americas and Africa are running near full throttle, leaving global markets with little leeway to absorb worsening product shocks. We estimate a 6.5mb/d year-over-year decline in global runs currently. Average July runs reached the lowest seasonal level since Covid, given continuing attacks on refineries in the Middle East and Russia and low China runs. Diesel global exports are down by 2.6mbpd or almost 35% YoY. Jet fuel global exports have declined by 1.2mb/d year-over-year or by 56%. As a result we believe, persistent oil-product supply shortages will keep refining crack spreads elevated for longer.
