Asia refining margins rocket to highest in nearly 4 years on Hormuz supply disruption
Asian refining margins have surged to their highest since 2022 as Iranian threats to shipping through the Strait of Hormuz have disrupted crude oil flows and forced refineries to cut runs, according to data and analysts.
Oil and gas prices have soared as fallout from the U.S.-Iran war has suspended trade through the chokepoint that typically handles more than 20% of daily global oil supplies.
Singapore's complex refining margins DUB-SIN-REF, a proxy for Asia refining profitability, jumped to nearly $30 a barrel on Wednesday as markets were roiled by crude shortages and expectations of further refining run cuts that could tighten fuel supplies, based on data from LSEG.
China and Thailand have also suspended fuel exports that could reduce supply in the region.
Jet fuel, diesel margins lead the surge. Jet fuel and diesel led the surge in margins among products in Asia. The margin for the aviation fuel breached $52 a barrel on Wednesday to its highest since June 2022, more than double from Friday, LSEG data showed.
Cracks for 10ppm sulfur gasoil jumped to just above $48 a barrel, the highest since August 2022.
"This is symptomatic of an impending shortage of feedstocks into the refineries due to the dependency on crude from the Middle East that is currently logjammed at the Strait of Hormuz," June Goh, senior oil market analyst at Sparta Commodities, said.
"Other sources of crude will take one to two months to arrive into our region. Refineries simply have to reduce intake to avoid shutting down prematurely," said Goh, adding that oil product stocks will deplete quickly if refineries do not receive crude soon.
Asian refiners, meanwhile, are struggling to secure prompt replacement crude cargoes. Some Chinese refiners have already started to cut runs, while India is scouting for alternative sources for crude imports.
Naphtha, fuel oil. The Middle East is also the top supplier of petrochemical feedstock naphtha and fuel oil used for ship refueling.
Asia's naphtha margin touched 4-yr highs this week as supplies tightened. Petrochemical makers in top producer Asia, however, are preparing to halt operations and trim run rates as buyers braced for naphtha delivery delays and higher costs.
High-sulfur fuel oil cracks hit an all-time high of almost $8 a barrel on Wednesday.
Residual fuel exports from the Gulf, which must pass through the Strait of Hormuz, accounted for about 9% of global seaborne flows in 2025, according to oil consultancy Vortexa.
Global oil majors have sought to cover fuel requirements by shipping products from the West, even if the arbitrage economics are not workable, traders said.
ExxonMobil is set to ship fuel from the U.S. Gulf Coast this month to cover its own import requirements in Australia.
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