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Renewed U.S.-Iran tensions lift crude, but tight refining keeps fuel high
The International Energy Agency says refining margins surged to four-year highs in early July as product markets tightened while crude prices fell.
Renewed U.S.-Iran hostilities have pushed crude prices higher again after earlier gains were largely erased when barrels returned and oversupply fears reemerged, OilPrice reports. Even as crude moved lower at times, the market showed a sharper split between crude and final fuel prices.
According to the International Energy Agency, refining margins jumped to four-year highs in early July because product markets tightened while crude prices tumbled, creating a disconnect between apparently well-supplied crude and tight gasoline and diesel. Middle Eastern refineries are still operating below normal after months of disruption tied to the Iran war, and refined product exports from the Gulf remain under half of pre-war levels even though crude shipments have recovered to about three-quarters of earlier volumes.
Geopolitical disruptions are also affecting refining capacity elsewhere, with Ukrainian drone attacks continuing to knock out refining capacity and squeezing diesel and gasoline supplies across Russia and neighboring markets. The result is that product markets remain remarkably tight despite crude resuming transit out of the Persian Gulf.
Higher refining margins can boost profitability for companies able to keep plants running, OilPrice notes, as cracking and refinery margins rise even when the feedstock, crude oil, becomes cheaper.
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