The split between recovering crude flows and scarce refined products points to a market where crude prices may ease while diesel stays expensive, keeping refining margins and diesel crack spreads elevated. That favours refiners with working capacity, particularly in the US, and adds pressure on governments facing fuel-driven inflation. Higher Saudi exports add to crude supply but do little to ease product shortages until Asian refiners lift fuel exports. Renewed Iranian attacks on shipping remain the key upside risk for both crude and diesel, with thin inventories leaving little room to absorb another disruption.
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Earlier:
- Trump signs order opening tax-free red-dyed diesel to all buyers as fuel costs bite
- Trump’s red diesel order unlikely to cut most pump prices, says GasBuddy’s De Haan
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The tankers are back in Hormuz, but they’re carrying the wrong cargo, and the world’s diesel drought won’t end until the Gulf’s damaged refineries do.
Summary:
- Kpler data show crude flows through Hormuz averaged about 10.3 million barrels a day in the week to Saturday, around 76% of the prewar baseline.
- Refined products made up only about 11% of flows, down from more than 20% before the war, the WSJ (gated) reports.
- Damaged refineries across the Gulf and Asian fuel export restraint are keeping diesel scarce, leaving the US as a key supplier.
- US diesel hit a record of around $6.50 a gallon last month, and analysts see a full recovery only well into 2027.
- Saudi crude exports doubled to around 7 million barrels a day in September, but renewed Iranian attacks on ships pose a risk.
Crude oil is moving through the Strait of Hormuz at close to prewar levels again, but very little of the refined fuel the world is short of, particularly diesel, is coming with it, according to a report in the Wall Street Journal.
Kpler data showed crude flows through the strait averaged about 10.3 million barrels a day in the seven days to Saturday, roughly 76% of the prewar baseline. Shipments of refined products such as diesel and gasoline came to only around 1.3 million barrels a day, about 11% of total flows, compared with more than 20% before the war.
The gap reflects damage to refineries across the region. Plants in Saudi Arabia, Kuwait, the United Arab Emirates, Iraq and elsewhere remain offline after missile strikes and other war-related outages, the Journal reported. Most of the crude now leaving the Gulf is heading to Asia, where it is due to arrive in about a month, but major Asian refiners in China, Japan and South Korea are holding on to most of their fuel output rather than exporting it.
That leaves the United States as one of the few large suppliers of refined fuel in a tight global market. US diesel prices hit a record average of around $6.50 a gallon late last month, while prices in California climbed to around $8.40. Analysts quoted by the Journal said that, even if current crude flows are sustained, a full recovery is unlikely before well into 2027, given the time needed to repair oil fields and refineries and replace the hundreds of millions of barrels lost.
The Trump administration has been pressing allies for help. Group of Seven economies agreed on Friday to release 100 million barrels of crude and fuel from emergency stocks, but stopped short of restricting exports of diesel and other products.
US oil executives have urged the Navy to prioritise escorting product tankers carrying diesel over the giant crude carriers it has mainly protected so far, the Journal reported. Those very large crude carriers hold about 2 million barrels each, roughly twice the capacity of the biggest fuel tankers.
Saudi crude exports have also rebounded sharply, reaching around 7 million barrels a day in September, double August’s level, as the kingdom loaded cargoes from both the Gulf and the Red Sea, according to Kpler. Analysts said the surge could reflect growing confidence in shipping security, or an effort to maximise sales before any renewed escalation.
Risks remain. Iran has launched fresh attacks on vessels around the strait in recent days, which could slow the recovery in shipments, though data so far show tankers continuing to transit in high volumes.
This article was written by Eamonn Sheridan at investinglive.com.