Mars Finance News, on July 25, Reuters recently reported that military tensions between the United States and Iran have escalated again, threatening the already fragile recovery of global refining capacity, with Asian refiners bearing the brunt. Asian refiners, originally expected to drive a rebound in global fuel output this quarter, have now fallen into a standstill due to renewed disruptions to shipments through the Strait of Hormuz. Yemeni Houthi forces have threatened to block Saudi oil exports via the Red Sea; according to calculations by research firm Energy Aspects, this could force more than 3 million barrels per day of Saudi crude that was originally shipped to Asia via the Bab al-Mandab Strait to be rerouted on longer routes. On Tuesday, three Saudi tankers that were scheduled to sail to China and India reportedly turned back toward the Suez Canal. As a result, Asian refiners that had already lined up crude supplies for August are now facing delivery delays for Middle East cargoes; meanwhile, U.S. and European refineries are operating at nearly full capacity, leaving almost no room to increase production. Lin Kezhuan, president of Formosa Petrochemical (FPCC), said the company originally planned to raise its operating rate to 480k barrels per day in August (nearly 90% of capacity). Although it has secured crude arrivals for August, due to the renewed Middle East conflict, delivery and vessel arrival times for some cargoes remain uncertain. A China refinery executive who asked not to be named also said it expects delays in loaded cargoes in July and August, making it difficult to ramp up production. Another major pressure amid tight supply comes from Russia: its refining facilities have continued to be hit by Ukrainian drone attacks, leading to domestic fuel shortages, forcing Moscow to limit diesel exports to curb a surge in domestic prices. With multiple factors compounding, global refining profit margins have been pushed to high levels: U.S. and European refining profit margins have reached historical highs, while Asian refining profit margins have also hit a two-month high. Neil Crosby, an analyst at Sparta Commodities, said global capacity is insufficient to simultaneously absorb the double shock of a Hormuz closure and Russia’s export ban, so prices must rise to curb end-customer demand. For diesel and jet fuel, Asian refiners’ profit margins have jumped to more than $65 per barrel, while the pre-war figure was only a little above $20.

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The escalation of the Iran-Iraq conflict threatens Asian refiners’ August production increase plans, with a global fuel supply shortage looming

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