The global refined products market is being squeezed by two major disruptions occurring simultaneously. In the Middle East, the escalation of the US-Iran conflict and the effective closure of the Strait of Hormuz have tightened crude feedstock availability, putting pressure on refinery operations worldwide. At the same time, sustained Ukrainian drone attacks on Russian refineries and export infrastructure are disrupting one of the world’s key suppliers of refined petroleum products.

As a result, global refinery runs in 1H26 remained below levels seen over the previous three years. The downturn accelerated after February, when the Middle East conflict intensified. The impact has been particularly severe in Russia, where repeated refinery attacks pushed refinery throughput down to just 3.8 mbpd in June, significantly reducing the supply of clean petroleum products (CPP), especially diesel.

Fuel shortage becomes impossible to ignore

Attacks have increasingly targeted Russia’s strategic export infrastructure, including the Black Sea and Baltic ports of Tuapse and Ust-Luga, as well as major refining hubs linked to diesel export pipelines, such as Perm, Moscow, Syzran, and Kirishi, raising the risk of further disruptions to middle distillate supply and export flows.

The disruption to Russian refining capacity has become so severe that authorities have extended restrictions on gasoline exports until the end of 2026 and jet fuel exports until November. More notably, Moscow has now also banned diesel exports through the end of 2026, highlighting the scale of domestic supply concerns.

The move is significant because Russia typically exports a surplus of 500,000-750,000 bpd of diesel. The deterioration in supply conditions has become so acute that the country is reportedly exploring motor fuel imports, including discussions involving India’s Vadinar refinery, an unusual step for a nation that has long been a major fuel exporter.

The damage inflicted on Russia’s refining sector has tightened domestic fuel availability and forced the country to look beyond its traditional sources of imported supply, Belarus and Kazakhstan, for additional volumes.

The impact is clearly visible in export activity. According to Drewry AIS data, Russian refined product loadings fell 67% MoM in July. Diesel exports experienced the sharpest decline, closely mirroring attacks on key refineries that traditionally supply export cargoes.

Russia’s primary diesel markets include Turkey, Brazil, and countries across North and West Africa. Any sustained reduction in Russian exports is therefore likely to intensify competition for supply across the Mediterranean and Atlantic basins, particularly at a time when exports from the Gulf region remain constrained.

For the shipping market, the implications are less positive. While tight product availability supports refining margins, the overall contraction in refined product trade volumes from two major exporting regions reduces cargo availability, creating a negative backdrop for product tanker demand and freight rates.

Meanwhile, refined product discharge data show imports into Russia surged in June and remained elevated in July compared with the previous year. The trend highlights the extent of Russia’s supply challenges, transforming it from a net exporter into an importer of certain fuel products. However, much of this incremental import demand is expected to be carried by sanctioned or shadow fleet vessels, limiting any meaningful benefit for the conventional product tanker market. For a deeper understanding of how product tanker charter rates will perform amid current uncertainty, you can find a comprehensive analysis in our new issue of Product Tanker Forecaster.

The US emerges as a safety net

The main offsetting factor is rising diesel exports from the United States. Strong demand from Europe and Latin America has strengthened the US position as an alternative supplier amid tightening global availability.

However, this shift also creates new competition for US barrels. Traditional buyers of US diesel will increasingly compete with former consumers of Russian exports for the limited supply. Although elevated refining margins provide incentives for higher production, the US has limited flexibility to significantly increase output.

Several refinery closures over the past two years have reduced available capacity, while refinery utilisation rates are already hovering around 96%. With little spare capacity remaining, the scope for a substantial increase in US refined product exports appears limited.

Source: Drewry