Refining constraints meet supply constraints

• US has now launched an 11th consecutive night of strikes on Iran, and Iran has retaliated with a mix of tanker strikes and attacks on Kuwait’s oil and water infrastructure.
• Meanwhile, Houthi threats have resulted in two fully laden VLCCs U-turning from the Bab el-Mandeb to head towards the Suez Canal instead. Redirection of flows can add as much as 4 weeks to the journey into Asia, and significantly increase freight, fuel and working capital costs.
• The alternative route evacuation route has also logistical constraints, with Egypt’s SUMED pipeline likely already operating at its max capacity of 2.5 mbd.
• CPC has suspended loadings since Monday due to drone attacks on its oil tankers at the Black Sea terminal, raising further concerns over global oil supplies.
• DFL, crude diffs and Brent timespread have moved up with increasing disruptions.
• Over the last 3 weeks, refining was the key constraint in the overall supply chain of products, particularly with Russian refineries offline, US refineries already at max utilisation rate, and China not seen to increase run rates to preserve crude inventories.
• However, if we start to see Yanbu and CPC exports also blocked off, this may flip the situation back into a crude short story, where crude flat price and diffs rise, and erode refining margin as product demand weakens with higher retail prices.
• The higher flat price is likely to trigger another IEA SPR release. Watch out also for any potential US export controls to tame domestic prices.

About the Author
June is a senior oil market analyst at Sparta specialising in global crude trade flows and refining economics across Asia and Europe. Her analysis is regularly cited by Bloomberg, the Financial Times, and Reuters. With a significant following in the energy community on X (@JuneGoh_Sparta), June’s insights are a staple for institutional traders navigating regional market shifts.
Connect: LinkedIn / X

About Sparta
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