Why Refinery Outages Are Creating a Global Fuel Squeeze Despite Available Crude

Crude oil is only the starting material. Households, airlines, truck fleets and manufacturers need specific products—diesel, gasoline, jet fuel and naphtha—that must be processed in refineries and moved through functioning export routes.

That distinction explains how fuel and petrochemical markets can tighten even when crude barrels remain available. A simultaneous hit to refinery capacity, shipping flows and product exports can leave crude stranded or rerouted while the usable fuels made from it become scarce and expensive.

The bottleneck is conversion capacity and logistics

Refineries turn crude into a mix of finished products. When they shut down, run at lower rates or cannot receive feedstock, the lost output cannot be replaced simply by producing more crude elsewhere.

The Middle East conflict disrupted crude and feedstock exports, prompting a growing number of Asian refineries and petrochemical companies to cut operating rates, shut units or declare force majeure. Reuters reported that Sinopec sought to reduce throughput by more than 10% from its original plan amid the supply gap.2 The same disruption affected refineries in the Gulf that normally supply Asian buyers with refined fuels.3

Russia represents a second major disruption. Reuters reported that Ukrainian drone attacks had forced about 700,000 barrels per day of Russian crude-processing capacity offline at 16 sites between January and May.5 Losing processing capacity matters to product markets immediately: it reduces the diesel, gasoline and other products available for domestic use or export.

Export controls magnify physical outages

Physical supply losses become more severe when major suppliers retain product at home.

China’s March ban on diesel, gasoline and jet-fuel exports was intended to protect domestic supply after Middle East disruptions, but it removed a balancing source of fuel for Asian markets already seeking alternatives.3 By September, China was expected to allow stable refined-fuel exports as controls eased, according to trade sources. That may relieve some pressure, but it does not restore damaged refinery capacity or normalize disrupted trade routes overnight.1

Russia’s domestic fuel constraints have also altered its role in product markets. Reuters reported that Russia, formerly a major fuel exporter, became an importer after refinery attacks created shortages.1

Why diesel prices and refining margins can outrun crude

A refinery outage reduces the supply of finished fuels. It does not necessarily eliminate the crude supply that would have entered the refinery. That gap can widen the crack spread—the difference between the price of a refined product and the cost of crude used to make it.

Diesel is particularly consequential because it underpins road freight, construction, farming, mining and backup generation. Goldman Sachs described diesel as being at the “epicenter” of the refining squeeze as war-related outages in Russia and the Middle East restrained global refinery activity.5 Later reporting said the bank more than doubled its forecast for diesel refining profits as strikes further constrained an already stretched system.5

Higher diesel and jet-fuel prices raise transport and operating costs. Higher naphtha prices spread through the chemical supply chain, affecting plastics, packaging, solvents, coatings and other manufactured inputs.

Naphtha turns an energy shock into a manufacturing problem

Naphtha is a refinery product and a crucial petrochemical feedstock. Asian steam crackers source more than 60% of their naphtha feedstock from the Middle East, making the region’s chemical producers highly exposed to interruptions in Persian Gulf flows.2

Japan provides a clear illustration. Reuters reported in April that Japanese companies reliant on naphtha or naphtha-based products were halting orders or cutting production despite official assurances about supply.4 The phrase “naphtha bankruptcies,” used in Japanese media, is better understood as a description of corporate anxiety and supply stress than as a verified tally of insolvencies.5

There were also mitigations. Japan said it had increased non-Middle East naphtha imports and maintained domestic refining, with already-procured imports and inventories intended to cover demand beyond June.13 The contrast highlights the issue: national inventories and alternative sourcing can buy time, but they do not instantly repair the regional production and transport system.

Russian crude could become an additional constraint

The immediate problem is largely refined-product capacity and distribution. But Russia’s crude outlook has weakened as well.

The International Energy Agency cut its Russian oil-supply outlook after continued attacks on refineries, storage and transport infrastructure, projecting Russian output to decline about 3% to 8.9 million barrels per day in 2026.19 Rystad Energy forecasts average Russian crude output of 8.95 million barrels per day in 2026 and about 8.6 million barrels per day in 2027.22

Russian government draft forecasts reported by Reuters also pointed to lower 2026 production, although Deputy Prime Minister Alexander Novak said the decline was temporary and output should rise as refineries complete maintenance.1718 Those differing outlooks underline the uncertainty around the duration of disruption.

What would ease the squeeze?

A sustained easing would require more than ample crude supply. It would depend on several linked improvements:

• refinery repairs and a return to normal operating rates;
• reliable movement of crude, naphtha and refined products through key shipping routes;
• restoration of product exports from major suppliers; and
• sufficient inventories to bridge the time between disruption and repair.

These adjustments take longer than a change in wellhead production. Specialized refinery units can be difficult to replace, while disrupted cargo patterns and export restrictions can keep regional markets tight. That is why crude availability alone is not a reliable guide to the price or availability of the fuels and petrochemical inputs the economy actually uses.