Record refining margins defy falling crude as product markets tighten
ICE Brent holds near $93.50/bbl but gasoline and diesel crack spreads hit new highs as supply constraints persist.
Refining margins for gasoline and diesel jumped to new record highs in the week of July 6, according to industry reports, after a re-escalation in the Middle East compounded the effects of Russia’s ban on diesel exports and rapidly depleting global fuel inventories.5
The surge comes as crude prices have fallen back to where they traded before the Iran conflict escalated, leaving a wedge between cheap crude and expensive refined products that has pushed crack spreads to extraordinary levels.6 ICE Brent crude front-month settled at $93.52/bbl on Wednesday (2026-07-22), barely above pre-conflict levels. Yet NYMEX RBOB gasoline front-month traded at $3.39/gal the same day, while NYMEX heating oil — a proxy for diesel — was at $4.13/gal. [live prices]
Middle Eastern crude exports jumped to more than 12 million barrels per day in June, Kpler data show, up from less than 8 million bpd in May. But the return of crude supply has not translated into cheaper products. Refinery runs have averaged just 3.91 million barrels per day so far this month, more than 1.4 million bpd below the same period last year.6
The gap reflects lingering supply-chain disruptions that persist even as energy shipments resume through the Strait of Hormuz. The EIA said in its second-quarter review that disruptions to international crude and product flows through the strait contributed to higher and more volatile crude prices through most of the quarter.7
US exports of crude oil and petroleum products hit a new record high of 14.2 million barrels per day in the week of May 11, the EIA reported, a 33% increase over the same week in 2025. Total US stocks of crude and products, including the Strategic Petroleum Reserve, fell by about 24.1 million barrels in that same week, one of the five largest weekly declines on record.1
Russian President Vladimir Putin acknowledged on June 29 that fuel supply problems persist for motorists and businesses, with queues forming at gas stations as Moscow weighs measures to stabilize the domestic market after refinery outages. Russian gasoline inventories stood at 1.7 million tons, down 4% from the same period a year earlier.3
The Russian government has decided to reduce the mandatory exchange-sales requirement for gasoline to 10%, Deputy Prime Minister Novak said. It has greater scope to curb diesel exports than gasoline, since diesel has historically been Russia’s surplus fuel, with roughly 40% of domestic output going to foreign markets.3
US biofuel blending targets are adding another layer of cost. Compliance credits known as RINs have doubled in value since the start of 2026, the EIA reported in June, driven by higher blending mandates. Renewable diesel production is expected to increase 24% this year and biodiesel production 41%.2
The higher crack spreads signal that global refining capacity remains tight in the aftermath of the Hormuz disruptions, analysts note. “Russian barrels are gone, China's export floodgates are uncertain, and Middle East re-escalation adds fresh risk,” Sparta’s analysts said in a note.4,5
The tail risk that would break this dynamic is a demand collapse. A Gallup poll from the week of May 18 reported that 55% of people said their personal financial situation was getting worse, a record high in the survey’s 25-year history. Core PCE inflation rose to 3.2% in March, the highest since November 2023.1
For now, product markets are pricing that risk in only on the crude side. That leaves the refining complex as the point where the next dislocation will show first, whether from a demand shock or a fresh supply disruption.