Ongoing conflicts in the Middle East, particularly involving Iran, have disrupted global oil markets and created significant tightness in refined product supplies. The Strait of Hormuz has become a critical chokepoint for crude oil transportation, while Asia has experienced reduced refining throughput and China implemented temporary export bans on fuel products. These disruptions have driven refining margins to record levels, outpacing the tightness observed in crude markets themselves.
The divergence between crude and refined product markets has been particularly pronounced, with gasoline, diesel, and jet fuel supplies tightening considerably more than crude supplies. Global petroleum product inventories have dwindled, and refinery utilization rates have climbed to exceptional levels. Officials at the International Energy Agency have noted the vulnerability of markets to further escalation, though they emphasized that strategic government reserves remain substantial at over 1 billion barrels.
Major international oil companies have capitalized on these market conditions, reporting their strongest second-quarter earnings since 2022. Shell achieved record refinery utilization rates exceeding 100 percent and saw refining margins rise substantially compared to the first quarter. TotalEnergies reported adjusted net income increases of 68 percent year-over-year, with refining and chemical divisions performing exceptionally. U.S. supermajors Chevron and ExxonMobil also reported multiyear earnings records, with Chevron achieving record refinery throughput above 1 million barrels per day.
Executives from major producers expect refining markets to remain robust throughout the near term, citing constraints in middle distillates including diesel and jet fuel. They anticipate potential upward pressure on product pricing into the following quarter and potentially beyond, particularly if European winter heating oil restocking occurs as expected. Industry analysts note that even if supply disruptions are resolved, low inventory levels globally could sustain elevated margins across the refining complex for several additional quarters.
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