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Português do Brasil The global oil refining industry is facing a period of intense pressure, with significant repercussions for energy markets. This article presents a factual analysis of the current situation, highlighting the challenges and trends observed in the fuel sector, focusing on the data shaping the outlook for the month of October.
Geopolitical pressures and refining capacity
Conflicts in the Middle East and Russia have been catalysts for current tensions in the refining market. Although crude oil prices have eased to around $85 per barrel following a peak of $118, the refining system—responsible for converting crude oil into usable fuels—remains under stress. Disruptions caused by these conflicts resulted in an approximate reduction of 5 million barrels per day in global refining capacity in the second quarter compared to the previous year. The International Energy Agency (IEA) reported average refinery throughput of around 78 million barrels per day during this period.
Refineries in strategic regions, such as Saudi Arabia, Bahrain, Kuwait, and the United Arab Emirates, experienced partial or total shutdowns due to conflicts. In China and other parts of Asia, operations were scaled back due to limited crude oil supply. Russia, in turn, saw its refining sector impacted by drone attacks, leading to domestic fuel shortages and diesel export restrictions.
Inventories and refining margins
Global gasoline and diesel inventories are near historical lows, while refining margins have reached record levels. These indicators point to a tight supply of refined fuels—the products consumed by households and industries—rather than crude oil itself.
In the United States, the benchmark refining margin, known as the "3-2-1 crack spread," reached nearly $70 per barrel, an all-time high. In Northwest Europe, margins also hit seasonal peaks, close to $30 per barrel. European diesel margins surged to around $65 per barrel, and U.S. gasoline margins remain near the record levels set in 2022. These figures reflect competition for a limited supply of fuels in the market.
The role of the United States and Its limits
In the first half of the year, the United States acted as a global "refiner of last resort
"refiner of last resort," increasing exports of crude oil and refined products to compensate for disruptions in other regions. However, this capacity is running out.
U.S. crude oil inventories—including both commercial and strategic reserves—fell to their lowest level since 1984. Gasoline inventories hit their lowest seasonal mark since 2012, and diesel stocks, despite a recent recovery, were at their lowest levels in more than two decades. Total exports of crude oil and refined products have begun to decline, falling to 10.7 million barrels per day last week after peaking at 14.2 million in April. With domestic demand peaking during the summer season, the U.S. ability to supply the global market is becoming constrained.
Future outlook
A rapid recovery of global refining capacity is unlikely. Key refineries in the Middle East and Russia remain compromised by conflicts, supply disruptions, or export restrictions. Restoring Russian capacity could take months or years, and Middle Eastern refineries will also need time to fully resume operations. With global fuel inventories at worryingly low levels, the market may be forced to balance itself through demand destruction, which could impact global economic activity.
This scenario highlights the vulnerability of the world economy given current conditions in the oil refining market—a crucial factor to monitor in the coming months.
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