TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search results
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search resultsOil refiners' Hormuz windfall may prove short-lived
Something ultimately has to give: either crude prices will rise, fuel prices will fall, or both.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
A drone view shows vessels anchored at the Strait of Hormuz on May 25, as seen from Musandam, Oman. (Reuters/Stringer)
O
il refiners around the world have seen profits surge thanks to a rare combination of robust fuel demand and weak crude prices, as markets have rapidly readjusted following the reopening of the Strait of Hormuz. The windfall is unlikely to last.
The benchmark US 3-2-1 crack spread, a widely watched measure of refining profitability, recently climbed above US$60 a barrel, the highest level on record. Refining margins in Asia and Europe have also risen sharply.
Refining profitability is determined by two factors: the cost of crude oil and the price of the gasoline, diesel and jet fuel produced from it. At the moment, both are moving in refiners' favor.
When it comes to feedstock costs, the tide has turned dramatically since the United States and Iran signed an interim ceasefire agreement on June 17.
Only last month, crude markets were grappling with an extreme supply shortage caused by the closure of the Strait of Hormuz. Today, the market is instead being flooded by hundreds of millions of barrels that had been stranded in the Gulf during the blockade.
Total Middle East crude exports, including volumes shipped through ports in Saudi Arabia and the United Arab Emirates that bypass Hormuz, rose to 12.35 million barrels per day in June from less than 8 million bpd in May, according to Kpler data. July exports are currently expected to reach 12.5 million bpd, Kpler estimates.
Although regional exports remain well below their pre-war average of around 18 million bpd, the sudden release of large volumes of crude has created a temporary glut.
