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By: Editorial Team, StoneX Media
The oil market has spent months watching the Strait of Hormuz, but the more durable pressure on fuel prices is building further down the supply chain. Diesel supply faces three fresh risks heading into the winter heating season, each tied to how much global refining capacity is sitting offline rather than to crude oil itself. A meaningful share of global refineries remains down, much of it from unplanned outages that carry no repair timeline, and that keeps diesel, gasoline and jet fuel tighter than the crude market alone would suggest. That gap between a recovering crude picture and a still strained product market is what makes the months ahead worth watching closely.
Bruno Santos is a Market Intelligence Analyst at StoneX in Brazil, where he covers energy markets and delivers price research and market intelligence. His work spans production, supply and demand tracking, trade flows and price formation across the energy complex.
Offline refining capacity reached around 14% of the global total between April and May, and roughly 10% remains offline, above the five-year average for this time of year. The bigger problem is the mix, and as Santos explains, unplanned outages behave nothing like scheduled work because "it can come from an attack, a fire or a power outage. There is no clear calendar and no clear repair timeline". Unplanned losses made up half of the offline total in June, which means a large slice of lost supply has no scheduled return. Consequently, diesel, gasoline and jet fuel can stay tight even as crude oil flows recover, leaving the downstream chain to normalize more slowly than the upstream.
Russia holds the largest volume of unplanned offline refining capacity, at around 2.5 million barrels per day, after Ukrainian attacks on refining centers disrupted crude processing. Total unplanned outages stood at around 3.6 million barrels per day by the end of July, with further losses at the Paraguana Refinery Complex in Venezuela and attacks reducing part of the processing capacity in Saudi Arabia and Kuwait. The first of the three forward risks is that new strikes on refineries in Eastern Europe and the Middle East could deepen the current shortfall, and that danger sits on top of a market that has not yet healed. Refinery damage is also slower to undo than a blocked trade route, which changes how quickly relief can arrive. According to Santos, "a damaged refinery, however, needs repairs before it can return, and it also depends on the timely arrival of crude barrels to keep operating".
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--- Written by Gus Farrow, Senior Manager, StoneX Media
--- Expert: Bruno Santos, StoneX Brazil, Market Intelligence Analyst
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The oil market keeps watching the Strait of Hormuz, but the tighter pressure on fuel is building in refining. With a large share of global capacity offline and unplanned outages carrying no repair timeline, diesel supply faces three fresh risks before winter.
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