TotalEnergies Earnings Signal How Far the Hormuz Squeeze Has Lifted Refining Margins
TotalEnergies posted a 68% earnings jump as Strait of Hormuz crude disruptions push NYMEX ULSD heating oil front-month to $3.74 a gallon Wednesday (2026-08-05).
TotalEnergies reported adjusted net income of $6 billion for the second quarter of 2026, up 68% from a year earlier, as the Iran war's grip on Strait of Hormuz crude flows drove oil prices and refining margins to multi-year highs. The company's European Refining Margin Marker soared nearly threefold year-to-date and rose 19% quarter-to-quarter.6
NYMEX ULSD heating oil front-month was at $3.74 a gallon on Wednesday (2026-08-05), up 0.81% on the session. Shell ran its refineries at 102% utilization between April and June, compared with 99% in the first quarter of 2026, and its second-quarter earnings more than doubled from a year earlier as record refinery utilization, higher oil and gas prices, and strong trading pushed profits above analyst expectations.6
The inventory position underpins the distillate pressure. Observable global oil stocks have fallen by a cumulative 246 million barrels since the conflict broke out: 129 million in March followed by 117 million in April, equivalent to roughly 3.9 million barrels a day of net withdrawal, according to Oil & Gas Journal analysis. Excluding barrels stranded in Gulf storage or trapped on tankers unable to transit the Strait, the effective drawdown is estimated to be steeper still.2
Global refinery crude runs in 2026 are now expected to average around 82 million barrels a day, nearly 1.6 million below 2025 levels, per OGJ projections, as reduced Hormuz throughput limits feedstock availability for refiners worldwide. Less crude reaching refineries means less refined product, and distillates, including heating oil, diesel, and jet fuel, are where the tightness shows first.2
ICE Brent crude front-month was at $80.39 a barrel on Wednesday (2026-08-05), up 1.94%, but well below the $90.12 at which the expiring September contract settled on Friday (2026-07-31) and substantially off the surge above $100 that followed Houthi militant attacks on two Saudi tankers in the Red Sea on July 23 (2026-07-23). Brent posted a nearly 24% monthly gain in July, its strongest since March, before the pullback.5,3
The retreat in crude since late July complicates a straightforward read on distillates. Lower crude relieves feedstock costs for refiners. But product tightness driven by the structural reduction in Hormuz throughput does not resolve simply because crude prices ease. Where refining margins stay elevated, ULSD stays bid.2,6
Europe is particularly exposed on the product side. Around 75% of the continent's jet fuel imports come from the Middle East Gulf, making Hormuz disruption an immediate supply shock for European aviation rather than a secondary effect. IEA executive director Fatih Birol has said there is "no room for complacency on oil security" amid escalating hostilities and a continued drawdown of available commercial stocks.2,6
Australia presents a different exposure profile. Around four million homes, roughly 40% of the country's housing stock, carry rooftop solar, and the country has surpassed 2 GWh of battery storage per million people after what RenewEconomy described as an "unprecedented build-out." Australian electricity costs are expected to fall for households and businesses on the main grid as wind, solar and battery storage push down wholesale electricity prices, insulating the domestic market from the fuel volatility pressuring distillate prices elsewhere.4,1
The CPC pipeline, which handles significant Kazakh crude export volumes, held discussions on Friday (2026-07-31) about whether to indefinitely halt shipments before deciding to continue operations, according to people familiar with the matter. Any reversal of that decision would add to already depleted global inventories and push product prices higher across Atlantic markets.5
If product cracks, ULSD over crude, compress alongside further crude declines, the refining windfall contracts sharply. If they hold while Brent drifts below the July highs, the inventory drawdown is still the dominant force in the distillate market.2,6