Middle East conflict induced global energy bottleneck benefits refiners Shell, TotalEnergies, ExxonMobil and Chevron

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Global fuel markets have become significantly tighter than crude oil markets as refining capacity, rather than crude supply, emerges as the primary constraint following the Middle East conflict, driving refining margins to record highs and boosting earnings for the world's largest oil companies. 

While crude oil flows have faced disruption through the Strait of Hormuz during the Iran conflict, analysts said shortages of refined products such as diesel, gasoline and jet fuel have become more acute, creating one of the strongest refining markets since Russia's invasion of Ukraine in 2022.

The tightening fuel market has benefited major refiners including Shell, TotalEnergies, ExxonMobil and Chevron, all of which reported some of their strongest quarterly earnings in recent years, supported by higher refining margins and robust trading performance.

Fuel markets tighten beyond crude supplies

Refined fuel markets have remained under greater pressure than crude oil supplies as refinery throughput in Asia declined, Russia maintained restrictions on diesel exports and commercial fuel inventories continued to fall.

International Energy Agency (IEA) Executive Director Fatih Birol warned that the supply imbalance extends beyond crude availability. 

"Refinery activity and product supplies have not picked up as much as crude deliveries, meaning that markets for refined oil products, including diesel and gasoline, are considerably tighter than those for crude," Birol said.

He added that despite IEA member countries holding more than one billion barrels of emergency oil stocks, tightening refined fuel supplies leave little room for complacency over global energy security.

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Refining margins lift oil majors' earnings

Shell more than doubled its second-quarter earnings compared with a year earlier as higher oil and gas prices, strong refining margins and record refinery utilisation of 102 per cent supported profitability. The company's indicative refining margin increased to USD 24 per barrel from USD 17 per barrel in the previous quarter.

"The operational performance of Refining has been excellent," Shell Chief Executive Officer Wael Sawan said.

TotalEnergies reported a 68 per cent increase in adjusted net income to USD 6 billion, with its European refining margin marker rising to USD 12.4 per barrel, almost three times higher than the first half of 2025.

Meanwhile, Chevron recorded refinery throughput exceeding one million barrels per day, while ExxonMobil said it expects refining margins to remain robust over the coming quarters.

Low inventories expected to sustain refining strength

Industry executives said refining profits could remain elevated as low global inventories, constrained refining capacity and continued supply disruptions continue to support fuel prices.

Chevron Chief Executive Officer Mike Wirth said middle distillates, particularly diesel, have become the tightest segment of the market, citing Russia's export restrictions, refinery outages and ongoing constraints in the Strait of Hormuz.

Even if Middle East crude exports normalise later this year, executives said inventories will require time to rebuild, suggesting the current strength in refining markets could continue for several more quarters.

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