NEWYORK

Atlantic Basin refining margins reached all-time highs in July as increasingly tight product markets pushed diesel, jet fuel and gasoline cracks sharply higher, according to the International Energy Agency's August Oil Market Report.

The IEA attributed the surge to seasonally higher demand, ongoing supply shortfalls and depleted stocks—a structural imbalance that has persisted in refined products. Global refinery crude throughputs increased 1.8 million barrels per day in July but remained nearly 5 million barrels per day below year-earlier levels, indicating a significant deficit in processing capacity. Existing capacity elsewhere cannot offset these bottlenecks.

Geopolitical constraints compound the tightness. Ukrainian attacks on Russian refineries and export infrastructure have disrupted product markets in Russia and beyond. Gulf exports of refined products and liquefied petroleum gas in June remained less than half their pre-war levels. Crude flows from the Gulf reached nearly three-quarters of their February rates, but loadings from key export refineries have yet to resume.

On the crude side, assessments of Strait of Hormuz flows diverge sharply. Vitol Group CEO Russell Hardy called the crude outlook "reasonable" and noted flows are picking up. Mansfield Energy reported improving crude flows. The U.S. Energy Information Administration, however, assumed oil shipments through the strait would remain severely constrained through August, with only slow increases beginning in September.

HSBC analysts indicated that liquids flows are averaging roughly 4 million barrels a day, well below public estimates of 9 million barrels a day—suggesting a larger supply deficit than widely perceived. The EIA's more cautious outlook prompted it to raise its forecast of shut-in crude oil production for August, further reducing global crude inventories.

Jefferies analyst Sam Burwell observed that global oil-market tightness is currently manifesting in cracks rather than crude prices. Wide cracks typically suggest refining runs should remain strong, supporting crude demand.

Prompt West Texas Intermediate futures were slightly higher after recovering earlier in the session.