Refining margins hit records as global supply falls 3.8M barrels per day

A historic squeeze on global refining capacity is driving refined product margins to record levels, creating a widening gap between crude oil prices and what consumers pay for fuel at the pump.

Global seaborne oil product trade averaged 27.7 million barrels per day in July, down 3.8 million b/d from a year earlier, according to tanker-tracking data from Kpler and the International Energy Agency. The decline has been broad-based, with diesel shipments falling roughly 1 million b/d year-on-year and Atlantic Basin diesel crack spreads reaching all-time highs.ogj

Goldman Sachs The Goldman Sachs Group, Inc. ↗ 3.73% reported that global refined product margins have risen approximately $30 per barrel year-on-year, with U.S. diesel margins exceeding $100 per barrel, even as global refinery throughput has decreased by nearly 7 million barrels per day compared to the same period last year. Approximately 10 million barrels per day of global refining capacity is currently offline, with refineries in the Middle East and Russia operating at roughly 60% utilization.moomoo

Conflict and Restrictions Drive the Shortfall

The Middle East has accounted for the largest share of lost exports, with Gulf countries contributing 2.9 million b/d of the year-on-year reduction due to shipping restrictions and attacks on energy infrastructure. Russian product exports declined 1.2 million b/d in July as Ukrainian drone strikes knocked out more than a quarter of the country's refining capacity, forcing Moscow to ban diesel exports.hydrocarbonengineering+1

China has also restricted refined product exports, which fell from 850,000 b/d in February to about 500,000 b/d during April through June. The IEA warned that global refineries processed 5.1 million fewer barrels per day in the second quarter compared with the same period in 2025.ogj+1

Refining Capacity, Not Crude, Now Sets Fuel Prices

The American Fuel & Petroleum Manufacturers gathered analyst perspectives this week explaining why fuel prices have decoupled from crude oil. "What matters to consumers and the broader economy is the price of refined fuels, not simply the price of crude oil," wrote James Rogan of the Washington Examiner News Corp ↗ 2.28%, as quoted by AFPM.hydrocarbonengineering

U.S. refiners are capitalizing on the environment. Valero Energy ↗ 2.15% reported that its refining margin reached $6.34 billion in the second quarter of 2026, nearly double the $3.28 billion recorded a year earlier. Marathon Petroleum ↗ 0.70% posted record distillate exports in the quarter, while Phillips 66 ↗ 1.20% maintained 96% refinery utilization.tradingview

RBOB Gasoline futures reached their highest levels since early June on Friday, with the September contract rising 2.5%, as refinery capacity challenges continued to push gasoline futures ahead of crude. Goldman Sachs expects refined product margins to remain above historical averages for an extended period, noting that even 500,000 b/d of new capacity expected from India and the Middle East over the next 12 months will be insufficient to offset existing losses if attacks on refineries persist.cmegroup+1