US oil refiners are ramping up fuel production to help fill supply gaps for gasoline, diesel and jet fuel as the Iran war chokes off Gulf energy supplies.
The brisk pace is expected to push many refineries to their effective maximum capacity for at least the rest of 2026, analysts said. Shrinking backup supplies in Europe and elsewhere, coupled with little prospect of restoring war-damaged Middle East infrastructure any time soon, are swelling crude-processing margins.
The signals are telling US refiners to “run, baby, run,” Randy Hurburun, head of refining for consultancy Energy Aspects, said during an interview. “A hole has been dug in product supply that won’t be filled until middle-to-late next year.”
So-called utilisation rates already are on the rise across the US, climbing for a third straight week and now at almost 92%, Energy Information Administration figures showed. Gasoline output touched a nine-month high in recent weeks and jet-fuel production is at levels not seen since the summer of 2024.
In Europe, which is normally reliant on supplies from the Middle East and Asia, stockpiles of jet fuel are nearing critical lows. US exports have surged in response, reaching an all-time record of 455,000 barrels a day last week.
Valero Energy Corp is actually shifting some facilities to make jet fuel that don’t typically produce it. Marathon Petroleum Corp. increased the flexibililty to switch some diesel production to jet fuel output when needed at two of its biggest refineries.
The worldwide supply imbalance has resulted not only from Iran’s effective closure of shipping via the crucial Strait of Hormuz but because of missile and drone attacks against onshore plants and equipment.
“We believe approximately 6mn barrels per day representing close to 6% of global refined products capacity has come offline during the conflict in the Middle East,” Marathon Chief Executive Officer Maryann Mannen said last week. “And the timeline for return of supply remains dependent on the extent of any damage to facilities and resumption of crude flows to those refineries.”
Meanwhile, in the US, gasoline demand has risen in four of the past five weeks to the highest seasonally since 2021, based on four-week averages. Stockpiles of the motor fuel are at their lowest for this time of year since 2014. High pump prices aren’t showing any signs of denting demand.
“I think you have read a lot about global demand destruction since the strait has been closed,” Valero Chief Operating Officer Gary Simmons said during a quarterly conference call. “It really appears to us that this isn’t really demand destruction. It’s more insufficient supply to meet demand.”