Global fuel markets face tightness amid Gulf disruptions

Global fuel and natural gas markets are facing significant volatility and tightness due to geopolitical tensions in the Persian Gulf and disruptions to LNG flows. Rabobank notes that European natural gas prices remain supported by low storage levels and a structural risk premium stemming from the lack of progress in U.S.-Iran negotiations. Continued instability in the Strait of Hormuz has led Qatar to suspend certain LNG shipments and extend force majeure on cargoes.

Vitol Group CEO Russell Hardy described global fuel markets as “pretty, pretty tight and inflexible,” noting that refined product inventories continue to draw as refining capacity fails to meet demand. Market stress is particularly evident in the downstream sector. In the Middle East, refinery capacity is constrained by Iranian strikes, while in Russia, capacity is restricted by Ukrainian drone strikes and a diesel export ban. Meanwhile, U.S. refineries have been operating at near-maximum capacity to compensate for global supply constraints.