Crack spreads reach $70 a barrel as products outpace crude in post-Hormuz markets
Refining margins at extraordinary levels reveal depleted product inventories even as ICE Brent crude pulls back from second-quarter wartime peaks.
Crack spreads reached $70 a barrel on Thursday (2026-07-17), according to a Bloomberg Surveillance broadcast that morning, underscoring a divergence that has opened between crude oil and refined product markets in the aftermath of second-quarter Hormuz disruptions. ICE Brent crude front-month closed at $88.10 a barrel on Friday (2026-07-17). The margin between input and output is where refiner economics now sit.6
The Macro Voices trading desk put it plainly: crude prices are a direction indicator, product prices are the market signal. At $70 a barrel, that signal points to downstream inventories that remain severely depleted even as crude has pulled back from wartime extremes.5,6
EIA data published on Wednesday (2026-07-15) confirmed that petroleum markets in the second quarter of 2026 were defined by "continued disruptions to international crude oil and petroleum product flows" through the Strait of Hormuz, generating elevated and volatile crude prices for most of the quarter. The same disruptions starved refineries of feedstock outside the Gulf, setting the conditions for the product tightness that crack spreads now reflect.4
Observable global oil stocks fell by a cumulative 246 million barrels during the conflict, 129 million in March and a further 117 million in April, equivalent to roughly 3.9 million barrels per day of inventory depletion, according to Oil & Gas Journal analysis. Barrels stranded in Gulf storage facilities or aboard tankers unable to transit the Strait made the effective drawdown steeper than those headline figures suggest.2
Crude prices fell sharply as the supply picture shifted. ICE Brent front-month dropped 4.79% to $73.39 a barrel on Wednesday (2026-06-24), its lowest settlement since March 2, driven partly by Chinese import data that compounded the oversupply narrative. China's customs figures showed crude oil imports at 7.82 million barrels per day in May 2026, the lowest level since February 2018, down 3.2 million b/d year-on-year.3
China's pullback from Gulf supply was substantial. Imports from Iraq fell 866,000 b/d against February's pre-conflict volumes, UAE by 840,000 b/d, Russia by 790,000 b/d, and Saudi Arabia by 392,000 b/d. Malaysia, a common transit route for Iranian barrels, was down 900,000 b/d. Beijing diversified toward South Sudan, Canada, Indonesia and Brazil, but total volumes were still 38% below February levels.3
Commerzbank analyst Norman Liebke argued that crude inventories had lasted longer than expected, which explains why prices did not hold their June lows. But he noted that inventories of some refined products had already fallen significantly, a reversal of the crude-first pattern that typically characterises supply shocks. Product markets tightened faster than crude markets loosened.1
NYMEX heating oil settled at $4.06 a gallon and RBOB gasoline at $3.39 a gallon at Friday's close (2026-07-17). Against ICE Brent front-month at $88.10, those product values imply crack spreads consistent with the $70-per-barrel figure Bloomberg Surveillance cited on Thursday (2026-07-17). Refiners are capturing that margin for now. Whether crude appreciates further to compress it or product inventories begin rebuilding first remains unresolved.6
Standard Chartered analysts had flagged the 200-day moving average at $78.71 a barrel on June 23 as potential support, and Brent has since recovered well above that level. The recovery reduces the likelihood of another sharp downside break but shifts focus to the pace of Hormuz supply normalization. Formal announcements on resumed operations have been limited, and Liebke's estimate of a March production decline of approximately 10.5 million barrels per day measures how far physical supply fell during the disruption.3,1
A $70 crack spread against $88 crude indicates that the second quarter's physical disruption has embedded itself in product markets more durably than in crude markets. If Hormuz normalization accelerates or Chinese restocking picks up pace, the pressure releases through crude first. If either stalls, refiners continue to carry the margin that crude traders are not directly pricing.1,2