After nearly six months of optimistic expectations, sentiment in global commodity markets is undergoing a decisive shift. Previously, the market generally bet that the Middle East conflict would subside quickly and that global energy supplies would rapidly return to normal. However, with actual transit figures through the Strait of Hormuz remaining low and signs of a protracted geopolitical standoff becoming increasingly clear, the global energy system is being forced to accept a new normal characterized by high prices, low inventories, and weak elasticity. This global shift in perception—from "hoping for peace" to "accepting reality"—is pushing oil and gas markets into a new phase where both supply and demand face significant pressure.
Transit data from the Strait of Hormuz provides a clear indication of the extent of the damage to global supply. Currently, the daily average number of oil tankers passing through the strait is less than 11% of normal levels, and crude oil exports from the Middle East dropped to approximately 9.6 million barrels per day in August. This physical disruption is continuously eroding the foundation of global energy supply. In its latest monthly report, the International Energy Agency (IEA) projects that global oil supply will be reduced by an average of 4.3 million barrels per day in 2026. This implies a supply-demand gap exceeding 1 million barrels per day—a deficit that is being transmitted to every energy-importing nation worldwide through higher import costs and tighter shipping logistics.
The contraction in energy supply is not uniform; instead, it exhibits a global divergence: crude oil supplies are weakening gradually, while refined product supplies are plummeting. Bottlenecks in global refining capacity have amplified the severity of the supply shock; in July, global refinery throughput dropped by approximately 5 million barrels per day year-on-year, with the decline concentrated in Asia and Europe. Russia's refining capacity has fallen to a 24-year low, further tightening global supplies of diesel and naphtha. Structural disruptions in oil and gas supplies have rendered global market buffer mechanisms largely ineffective; since the conflict began, global observable oil inventories have fallen by a cumulative total of over 400 million barrels, and spot price premiums have widened across the board.
The core issue of the current global energy crisis has shifted from crude oil supply to refined product supply—a problem that is simultaneously plaguing all major consuming regions. The diesel market is grappling with a global "perfect storm": US diesel crack spreads have breached the historic $100-per-barrel mark for the first time, with inventories hitting a 30-year seasonal low; European diesel prices have nearly doubled year-on-year, and Northwest European crack spreads far exceed last year's annual averages; meanwhile, Asian markets face tight supplies of both jet fuel and diesel, with Singapore’s middle distillate inventories in steady decline. Costs across the entire global value chain—from agricultural harvesting and freight transport to industrial production—are being driven upward.
The shortage of refined products has evolved from a regional issue into a global economic reality. Sky-high crack spreads not only signal soaring refining profits but also directly inflate fuel costs for transoceanic shipping and overland logistics. Although US refined product exports have hit a record 1.9 million barrels per day, this has accelerated the depletion of domestic stocks, creating a global cycle where "more exports lead to greater shortages," as buyers in Europe and Latin America compete with domestic US users for limited supplies. When crack spreads in major global markets hit historic highs simultaneously, the signal sent is far more urgent than mere crude oil price volatility; it foreshadows the spread of global inflationary pressure from the energy sector to the broader economy.
Looking ahead, the International Energy Agency (IEA) projects that even by 2027, the recovery of global oil demand will lag behind the rebound in supply, with the market potentially shifting to a surplus by year-end—though this outlook hinges heavily on an easing of geopolitical tensions. Ultimately, this structural repricing—driven by rigid supply constraints and bottlenecks in refining capacity—is only just beginning to profoundly impact the costs and competitiveness of every cell within the global economy.(Source: Sinochem New Network)
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