Why Crude Can Trade Near $90 While Diesel Prices Surge

The unusual feature of the current oil market is the widening gap between crude and finished fuels. North Sea Dated crude was trading around $92 per barrel in August, while diesel, gasoline and jet-fuel margins remained close to record levels. 8

At the ONS conference in Stavanger, TotalEnergies CEO Patrick Pouyanné described the split as a bearish crude market alongside a bullish refined-products market. His explanation was straightforward: crude was still moving through the Strait of Hormuz, but higher freight, insurance and security costs were stopping refined products from making the same journey economically. 13

Shell CEO Wael Sawan characterized the pressure on oil products as a “triple threat”: Ukrainian attacks on Russian refineries, dangers to shipping in the Persian Gulf and disruption in the Red Sea.

The real shortage is deliverable fuel

This is more than a question of how many barrels exist underground. Crude and refined products move in different vessels and through different trading networks.

Very large crude carriers can spread security, insurance and voyage costs across cargoes of roughly 2 million barrels. Smaller clean-product tankers carry much less fuel, so the same risk premium adds more cost to each barrel. When freight and security costs rise sharply, a crude voyage may remain viable while a diesel or gasoline voyage does not. 1113

That creates a physical-distribution problem: refineries and consumers may be short of the right fuel in the right place even when crude cargoes are still available elsewhere.

Russian refinery attacks are tightening diesel supplies

Ukrainian strikes have cut Russia’s refining throughput by nearly 30%, to below 4 million barrels per day in recent months, according to Reuters. Russia also banned diesel exports in July.

Russian seaborne oil-product exports fell by about one-third month on month in July, to approximately 3.9 million metric tons, reflecting both lower production and export restrictions.

Pouyanné was also reported as estimating that Ukrainian drone attacks had reduced Russian fuel supplies by 3 million to 3.5 million barrels per day. That figure should be treated cautiously: it describes a broad loss of fuel availability or disrupted supply, not necessarily a verified amount of refining capacity permanently removed from service. 11

Why pump prices can stay high when crude falls

Crude is only one component of the price of gasoline and diesel. Refining margins, transportation, insurance, regional inventories and the availability of specific fuel grades can all become more important when supply chains are disrupted.

European low-sulfur gasoil futures reached a record premium of $74.66 per barrel over crude on July 30, while European jet-fuel refining margins remained above $80 per barrel. A crack spread measures the difference between a refined product and its crude feedstock; it is not the same as the retail price paid at a fuel station. 18

The implication for consumers is uncomfortable: a retreat in benchmark crude does not guarantee cheaper gasoline or diesel. Reporting from the ONS conference indicated that European consumers could remain exposed to high fuel prices, while U.S. gasoline could stay above $4 per gallon if the product and delivery bottleneck persists.

Asia is absorbing a major product shortfall

Kpler estimates that Asian imports of light and middle distillates—including diesel, jet fuel and gasoline—will average 5.59 million barrels per day in August. That is close to July’s 5.60 million bpd, but 21% below the 7.08 million-bpd average for the three months through February. The difference represents a shortfall of roughly 1.49 million bpd. 17

The impact is uneven. Less-wealthy fuel importers have less ability to outbid other buyers and fewer inventory buffers, leaving countries such as Indonesia and the Philippines more exposed. Australia has been better able to secure replacement cargoes, but at substantially higher prices. 17

This is why the crisis cannot be measured only by headline crude shipments through Hormuz. The more relevant question for households, airlines, truckers and manufacturers is whether usable refined fuel can reach them at an affordable price.

The refining margin shows where the market is tightest

A Singapore refinery reportedly earned a $71.29-per-barrel margin on gasoil on August 21, down from $85.63 a month earlier but still exceptionally high. Gasoil is a key building block for diesel. 6

Such a margin is a powerful market signal: refiners are being rewarded for producing a product that buyers urgently need. It also helps explain why the market can look relatively soft for crude while remaining extremely tight for diesel and other middle distillates.

The pressure could persist if Middle Eastern supply remains disrupted, Russian exports stay restricted, Asian refineries cannot restore normal runs and possible U.S. sanctions on Iran further limit available barrels. Additional exports from China could ease the imbalance, but relief would depend on both sufficient refinery output and the ability to transport products safely. 23

What would bring prices down?

A rapid return to normal would require several changes at once:

• safer and cheaper shipping through the Persian Gulf and Red Sea;
• the restoration of Russian refinery throughput and product exports;
• higher output from Asian and other replacement refineries; and
• enough time to rebuild depleted fuel inventories and normalize shipping schedules.

Even a security improvement would not immediately refill regional storage tanks. Shell has separately warned that restoring balance in the broader crude market could take close to a year or longer, suggesting that physical energy markets may remain stressed after the first supply disruption eases.

The central lesson from Stavanger is therefore not that crude prices no longer matter. It is that crude is no longer the only—or necessarily the binding—constraint. For consumers, the decisive shortage is increasingly refined fuel that can be transported, insured and delivered to the market where it is needed.