Crack spreads in refined product markets have surged to an unprecedented $70 a barrel, signaling that the processing cost now rivals the price of the crude itself. This volatility is fueled by the exhaustion of Strategic Petroleum Reserves, which saw 32 IEA members release 172 million barrels of U.S. crude to artificially dampen prices. With those buffers depleted, the market lacks the necessary shock absorbers to handle ongoing geopolitical instability.

Supply chains face mounting pressure as transit through the Strait of Hormuz remains erratic following naval clashes and retaliatory strikes. Simultaneously, damage to Russian refineries has removed 1.4 million barrels per day of capacity, forcing Moscow to ban fuel exports and tightening the global diesel market. OECD government inventories have plummeted to their lowest level since 1990, while U.S. Strategic Reserves sit at roughly 316 million barrels. With the Northern Hemisphere’s peak travel season approaching, the IEA warns that global stockpiles are on track to hit historic lows, leaving importers with few alternatives as supply shocks continue to outpace production.