Bob McNally, founder and president of Rapidan Energy Group, has warned that the global crude refining system is operating with no margin for error. This precarious situation is attributed to two main factors: an increase in Ukrainian attacks targeting Russian refineries and U.S. refining facilities running at near maximum capacity. The closure of the Strait of Hormuz has further exacerbated the pressure on the global refining system.
The broader context reveals a significant squeeze on refined product markets. Geopolitical conflicts, including renewed hostilities in the Strait of Hormuz and Russian export bans, have severely reduced supply. This has pushed fuel prices to peak levels, comparable to those experienced in 2022 after Russia's invasion of Ukraine, with gasoline, diesel, and jet fuel prices hovering between $130-$170 per barrel. The diesel crack spread, a key measure of refining profitability, surged to $102 a barrel, nearly tripling pre-war levels.
Global refinery runs were estimated to be 7.5 million barrels per day below July 2025 levels, with an expected average of 80.1 million barrels per day in the second half of 2026, which is 2.4 million barrels per day lower than previous forecasts by S&P Global Energy. Refined product exports from key suppliers have fallen by 30%, or 4 million barrels per day, since the start of the conflict compared to the same period in 2025. This has been compounded by Russia's diesel export ban, which removed 10% of waterborne supply, and China's continued export constraints, with Chinese crude runs almost 2.9 million barrels per day below year-ago levels in July.
While U.S. refiners are currently operating at a high utilization rate of 96% and are a crucial source of global refined products, the approaching hurricane season and traditional fall maintenance season present limited buffers. Experts like Daniel Evans of S&P Global Energy emphasize that the global refining complex, outside of constrained markets like Russia, the Middle East, and China, is already running at or near multi-decade highs, indicating a severe lack of available capacity to respond to disruptions.
