US-Iran Conflict Disrupts Global Oil Refining Operations

The escalating conflict between the US and Iran is threatening to disrupt global oil refining operations, potentially keeping fuel stocks tight and pushing prices higher. Asian refiners had been planning to increase output in August, but attacks on Gulf crude exports through the Strait of Hormuz have reduced supply.

According to Energy Aspects, Yemen's Houthi rebels have threatened to block Saudi Arabian exports from the Red Sea, which could force more than 3 million barrels per day of Saudi crude to take longer routes. This has led to delays in shipments from the Middle East, affecting Asian refiners who had lined up crude supply for August.

China's refinery runs slumped to just 58% of capacity in June due to weak domestic demand and fuel export restrictions. However, Beijing eased export restrictions for July, and Wood Mackenzie sees China's throughput climbing to 13.96 million bpd in August. Chinese independent refiners are expected to raise output as they have bought discounted Middle Eastern crude.

U.S. and European refiners are running at record utilisation rates, maximising third quarter output to capitalise on record margins. However, they have little room to ramp up production, with gasoline stocks already 'super low' at the U.S. Gulf Coast.