CGS released a research report stating that with the partial recovery of supply, the premium on spot oil has recently retreated somewhat, easing the impact of high-premium spot cargoes on refinery procurement costs. The prolonged Middle East conflict has sharply boosted rigid demand for long-distance crude transportation, and combined with a shortage of fleet supply, global Very Large Crude Carrier (VLCC) freight rates have risen significantly since mid-to-late August. The United States has low dependence on Middle Eastern oil, and its refinery utilization rate remains at a high level. The bank recommends paying attention to companies with refinery capacity layouts in Southeast Asia or with sufficient refined product export quotas. The main views of CGS are as follows:
Short-term oil supply partially recovers, crude spot premium retreats
After export operations at Yanbu port were disrupted by attacks, Saudi Aramco increased crude loading volumes at the two Gulf terminals of Ras Tanura and Ju'aymah, and conducted ship-to-ship transfer operations outside Oman's Sohar port to supply Asian refineries. According to Bloomberg data, Saudi crude exports in September 2026 were 6.13 million barrels per day, setting a new monthly high since April 2026. With the partial recovery of supply, the spot oil premium has recently retreated somewhat, easing the impact of high-premium spot cargoes on refinery procurement costs. As of October 19, the prompt Brent spot premium was $8.19 per barrel; Oman crude's premium over Dubai crude was $3.88 per barrel, and Murban crude's premium over Dubai crude was $4.22 per barrel. In the medium to long term, geopolitical disruptions in the Middle East continue, and the stability of external oil supply remains to be verified.
VLCC freight rates pull back at the margin, logistics cost impact slightly eases
The prolonged Middle East conflict has sharply boosted rigid demand for long-distance crude transportation, and combined with a shortage of fleet supply, global VLCC freight rates have risen significantly since mid-to-late August. According to Bloomberg data, VLCC freight rates on the Arabian Gulf-to-Singapore route soared to $21.3 per barrel in October, compared with averages of $8.8 and $15.8 in August and September respectively, and an average of $2.2 in January-February; during the same period, freight rates for West African crude shipped to China also rose. In the short term, VLCC freight rates remain elevated but show signs of marginal retreat, mainly because after a new round of attacks recently, VLCC transportation demand on the Gulf of Oman route weakened somewhat, and the U.S. government is considering lifting sanctions on some "shadow fleet" vessels. On October 19, VLCC freight rates for the Middle East Gulf Ras Tanura-to-China Ningbo and West Africa Malongo/Jeno-to-China Ningbo routes were $256 per ton and $278 per ton respectively, down $11 per ton and $21 per ton from previous highs. As VLCC freight rates retreat at the margin, the impact of logistics costs on refineries is expected to ease slightly.
Multiple factors disrupt global refinery operations, regional utilization rates diverge
Affected by multiple factors including the degree of damage to refinery facilities, external dependence on oil, refined product control policies, and seasonal maintenance, global refinery utilization rates have diverged this year, with processing volumes declining year-on-year. Among them, due to Ukraine's continued attacks on Russia's refining, storage, and other energy infrastructure, Russia's domestic refined product supply is tight; the government imposed a diesel export ban on July 8, affecting global diesel trade, and partially lifted it on October 10. The Middle East has a relatively large share of damaged refinery capacity, and recovery is expected to take time. China's refinery utilization rate has been affected by multiple factors including feedstock, profitability, and maintenance, declining first and then rising in the first three quarters. The United States has low dependence on Middle Eastern oil, and its refinery utilization rate remains at a high level.
Oil product inventories drop to lows, awaiting cracking spreads to stabilize and turn higher
According to IEA data, affected by the year-on-year decline in refinery processing volumes, global gross diesel exports in January-September 2026 were 4.7 million barrels per day, down 10% year-on-year. Preliminary trade data show that global gross diesel exports in September 2026 were 4.7 million barrels per day, a year-on-year decrease of about 700,000 barrels per day; among them, combined net exports from the Middle East and Russia fell by 1.3 million barrels per day. Although combined exports from the United States and China increased by 610,000 barrels per day year-on-year, this failed to offset the loss of net exports from the Middle East and Russia. As supply losses exceeded the decline in demand, diesel and gasoline inventories in major global consumption regions continued to be drawn down. Currently, gasoline and diesel inventories in Europe, the United States, and China are all at low levels compared with the same period over the past five years. In the short term, affected by high oil prices, overseas cracking spreads have adjusted downward from highs, but with low oil product inventories combined with expectations of diesel destocking, overseas cracking spreads are expected to stabilize and turn higher going forward.
Risk warnings: 1. Risk of a sharp rise in crude oil prices; 2. Risk of a sharp rise in VLCC freight rates; 3. Risk of global refinery new capacity being put into operation exceeding expectations; 4. Risk of overseas refinery utilization recovery progressing faster than expected; 5. Risk of weakening terminal oil product demand, etc.
Comments