Global oil markets are undergoing a structural shift as supply disruptions in the Strait of Hormuz collide with diverging regional demand trends. The halt in oil flows is not just tightening crude availability but reshaping how refining systems operate across regions. Market participants are now pricing in a prolonged imbalance between supply access and product demand rather than a short-lived geopolitical shock. This divergence is creating a clear separation in refining performance, with implications for trade flows and pricing power.
Alex Hodes, StoneX Director of Energy Market Strategy, has extensive experience analysing global refining systems and crude trade flows across regions. His perspective is grounded in tracking how supply chain disruptions and demand shifts interact in real time, providing insight into which refiners can adapt and which remain exposed.
Key Themes from the Discussion
Asian refiners reduce run rates as Middle Eastern crude supply becomes constrained and less accessible.
US demand remains resilient, with total product supplied running one million barrels per day above the five year seasonal average.
Jet fuel and diesel demand show early signs of weakness in Asia while gasoline demand in the US stays strong.
Asian Refiners Face Demand Weakness and Supply Constraints
Asian refiners are experiencing a dual pressure from both restricted crude supply and weakening end demand. Alex Hodes notes that "those refiners are typically more exposed to the Middle East crude oil grades" [00:03:05], which are currently difficult to secure due to halted flows through the Strait of Hormuz. As a result, several refiners have already reduced run rates, signalling a contraction in regional refining activity. This supply constraint is compounded by early signs of demand destruction, particularly in diesel and jet fuel markets. Consequently, Asian refining margins are being squeezed not by pricing alone but by reduced throughput and declining product demand.
US Refiners Benefit from Strong Demand and Export Flexibility
US refiners are emerging as relative beneficiaries due to resilient domestic demand and greater operational flexibility. Alex Hodes highlights that "the demand overall in the US is coming in a million barrels per day above the five year seasonal average" [00:09:04], underscoring the strength of gasoline consumption. This demand resilience allows US refiners to maintain high run rates while also capturing elevated export margins. Additionally, their access to alternative crude sources, including Canadian supply, reduces exposure to Middle Eastern disruptions. As a result, US refiners are positioned to capitalize on global imbalances, reinforcing the widening divide across the refining sector.
Frequently Asked Questions
Why are Asian refiners cutting run rates?
Asian refiners rely heavily on Middle Eastern crude, which has become harder to access due to disruptions in the Strait of Hormuz. Combined with weakening diesel and jet fuel demand, this has forced some refiners to reduce throughput.
Why is US oil demand still strong?
Recent data shows total product supplied in the US running one million barrels per day above the five year seasonal average. This reflects continued strength in gasoline consumption despite global uncertainty.
Who benefits most from the current oil market disruption?
Refiners with access to alternative crude sources and strong export capabilities, particularly in the US Gulf Coast, are benefiting the most from elevated margins and sustained demand.
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--- Written by Frédéric Guétin, StoneX TV Producer
--- Expert: Alex Hodes, StoneX Director of Energy Market Strategy
Energy
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