Crude oil inventories sit comfortably above emergency thresholds. Jet fuel does not. Refiners face a painful trade-off this summer. Boost output of one and watch the others run short.
Disruptions from the war in Iran have tightened supplies through the Strait of Hormuz. Middle East exports that once fed European and Asian markets vanished almost overnight. Jet fuel prices doubled in places. Airlines scrambled. Some carriers canceled flights. Others raised fares.
Yet total global oil stocks stand at roughly 101 days of demand, according to Goldman Sachs. They could slip to 98 days by the end of May. That level remains above minimum operational needs. The problem lies elsewhere.
Commercial refined-product stocks have fallen from about 50 days of demand before the conflict to 45 days now. Specific products show even steeper drops. Naphtha inventories in the UAE’s Fujairah storage fell 72% since late February. The Amsterdam-Rotterdam-Antwerp hub saw a 37% decline over the same period. European commercial jet fuel stocks, excluding strategic reserves, could drop below the International Energy Agency’s 23-day critical threshold as soon as June. Business Insider first detailed these figures in its coverage of the bank’s analysis.
Jerome Dortmans, co-head of global oil and products trading at Goldman Sachs, sees the shift clearly. “The refining industry is very efficient in finding supply at the right price levels, and we’ve certainly created the right price environment for global refining to try to optimize, to maximize jet-fuel production,” he said on the bank’s “The Markets” podcast.
Refiners have responded. They adjusted yields to push more kerosene-range molecules into jet fuel. Higher crack spreads made the switch profitable. But barrels contain fixed chemistry. More jet fuel leaves less room for diesel or naphtha in the same distillation columns and crackers.
“By solving the jet problem, we could be creating other problems and other choke points within the refinery system,” Dortmans added. Business Insider reported those remarks on May 11.
Trade-offs in the barrel
That warning captures the current bind. Simple hydroskimming refineries have limited flexibility. Complex facilities with hydrocrackers and fluid catalytic crackers can shift yields by 3 to 5 percentage points. Even those moves come with costs. Higher hydrogen use. Different catalyst regimes. Reduced output of high-value gasoline or petrochemical precursors.
Diesel markets already feel pressure. Trucking and heating demand stay steady while marine gasoil rules tighten under IMO standards. Naphtha feeds ethylene crackers that produce plastics. Any sustained squeeze there ripples into consumer goods pricing within months.
Europe stands most exposed. The UK holds no strategic jet fuel reserves and ranks as the continent’s largest net importer. Inventories there could hit critically low levels first. Asia outside China faces parallel risks. South Africa, India, Thailand and Taiwan appear particularly vulnerable, Goldman Sachs noted.
Recent coverage adds urgency. Europe’s jet fuel supplies could breach the 23-day threshold in June, Fortune reported days after the Goldman note. Asian refinery runs dropped sharply in April as Gulf crude access dried up. Output of jet fuel and kerosene fell more than 500,000 barrels a day from February levels, according to OilX data cited by The Straits Times on May 12.
US refineries ramped up jet production to export more. They increased jet output by 26,000 barrels a day in late April. Yet overall utilization already runs near multi-decade highs. To make room, operators cut gasoline production by about 53,000 barrels daily, CNN explained. American drivers now pay indirectly for European summer travel.
Crude prices reflect the tension. Brent traded near $106 a barrel and West Texas Intermediate around $100 in recent sessions, up more than 4% on renewed worries that peace talks between President Donald Trump and Iran remain stalled. Those levels support refinery margins but do not solve the configuration problem inside the plants.
Longer term, structural forces compound the issue. Global refinery runs face a projected 1 million barrel-a-day year-on-year decline in 2026. Several older European facilities closed or converted to renewables. US capacity shrank through the closure of Phillips 66’s Los Angeles refinery and Valero’s Benicia plant among others. Jet fuel demand, meanwhile, recovered beyond pre-pandemic levels and heads toward record highs.
Airlines feel it first. Spirit Airlines ceased operations after jet fuel costs surged. Air France-KLM trimmed capacity growth forecasts citing a potential $2.4 billion increase in its fuel bill. UK carriers received regulatory approval to cancel or consolidate flights to conserve supplies. Swiss International Air Lines told Reuters it holds enough fuel for six weeks but prepares contingency plans such as tankering.
Petrochemical markets watch nervously too. Naphtha and LPG shortages already slowed some industrial activity in Asia. A sustained diesel squeeze would lift trucking rates and feed into broader goods inflation.
So refiners chase the highest margin molecule each day. They maximize jet fuel when its crack spread justifies the shift. But the system holds little slack. One product’s relief becomes another’s shortage. Dortmans’ choke-point warning looks prescient.
Markets price this reality. Refined-product cracks stay elevated even as crude volatility dominates headlines. Summer travel peaks in July and August. That timing aligns with the lowest inventory projections. Physical shortages at select airports remain possible. Rationing talk has already surfaced in Europe.
Traders scan ARA and Singapore storage data daily. Any reopening of Hormuz flows would help, yet Goldman analysts caution that full normalization of deliveries would take several weeks even then. Logistics must realign. Tankers must reroute. Refineries must reoptimize.
Until that happens, the barrel’s fixed limits rule. More jet fuel. Less diesel. Tight naphtha. High prices across the slate. The crude glut that never quite materialized has given way to a refined-product scramble with no easy exit.
Energy executives knew complexity lurked beneath the surface numbers. Now the rest of the economy gets the lesson too. Planes may fly. Trucks may slow. Plastics may cost more. All because one barrel can only yield so many fuels at once.
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