Global Fuel Crunch Deepens Despite Record US Refinery Runs

The global fuel crunch continues despite record U.S. refinery runs producing the most gasoline and diesel since before the pandemic lockdowns. According to the Energy Information Administration, U.S. refineries churned out an average 17 million barrels of fuels last week, the highest since September 2019.

Record-high refining margins have encouraged refiners to run as hard as possible, resulting in a solid draw to crude inventories, said Matt Smith, Kpler's director of commodity research. However, these increased production levels are not enough to fill the gap in fuel supply, and would lower U.S. crude oil stocks, which are already quite low.

The problem is multifold, with the most obvious reason being the crude and fuel export crunch caused by the war in the Persian Gulf. The Gulf states were not only major exporters of crude but also exported a significant amount of refined products. Meanwhile, European countries have been shutting down refineries, reducing fuel production capacity.

Additionally, China's government has strict fuel export quota policies that restrict refiners' production decisions. This factor was highlighted by Kpler as equally important to Russia's drop in refinery output due to Ukrainian drone attacks, which led to a diesel export ban. The ban added to the already tight diesel supply situation.

The world is facing a diesel supply crunch, pushing prices even higher and making the fuel unaffordable for poorer nations in Southeast Asia, Africa, and Latin America. Some refineries in Russia have restarted operations, but the ban on diesel exports remains in place as Moscow prioritizes domestic supply security.