When the Crude Runs Out

The first phase of the Iran shock was about crude prices. The second is about product shortages. The third, now beginning, is about what happens when refineries stop running.

Key Takeaways

• The IEA’s April Oil Market Report puts North Sea Dated at around $130/bbl at time of writing, with physical crude hitting near $150/bbl at its peak. The premium for physical Dubai over swaps reached nearly $38/bbl. Brent futures have remained materially softer. The disconnect between screen and physical is as wide as at any point since COVID.
• Asian refiners initially processed pre-war cargoes at lower cost while selling products into a scarcity market. That buffer has been absorbed. The IEA puts Asian throughput at 29.4 mbpd in March, falling to 28.5 mbpd in May. Combined with Middle East cuts, total feedstock-constrained run reductions reached around 6 mbpd in April. Singapore’s average refinery utilisation has dropped below 50%, against a typical 70%.
• Singapore diesel cash differentials moved from $0.84/bbl on 27 February to $28.69/bbl by 12 March. Jet fuel in Singapore jumped 140% to around $230/bbl at its peak, with crack spreads reaching $79/bbl before easing back to approximately $40/bbl. These are the prices that drive freight, power, agriculture, and aviation.
• The Gulf accounts for roughly a quarter of global urea exports, with Qatar, Saudi Arabia, Oman, and Iran the largest sellers. Middle East urea FOB has moved from around $380/tonne in February to above $720/tonne by mid-April. Ammonia is up roughly 95% over the same window. India’s kharif planting season opens in June and accounts for around 60% of annual urea demand.
• The Gulf accounts for roughly a quarter of global urea exports, with Qatar, Saudi Arabia, Oman, and Iran the largest sellers. Middle East urea FOB has moved from around $380/tonne in February to above $720/tonne by mid-April. Ammonia is up roughly 95% over the same window. India’s kharif planting season opens in June and accounts for around 60% of annual urea demand.

Analysis And Commentary

• Asian refiners looked well-placed at the start of the crisis. They were not. Shipping delays meant many plants were still processing pre-war cargoes while selling diesel and jet fuel into a scarcity market. Margins looked healthy. They were a timing artefact.
• The risk is a slow grind: refineries cutting output, product shortages reaching end users, and economic data weakening after prices have already fallen. Even if the strait reopens today, Rystad, an energy research firm, estimates it will take until July for oil flows to recover to 90% of pre-war levels. After that, those barrels still need up to two months to reach Asian refineries and be refined into usable fuel. Fuel shortages on petrol station forecourts could persist through the final months of 2026 regardless of what happens at the negotiating table.
• The risk is a slow grind: refineries cutting output, product shortages reaching end users, and economic data weakening after prices have already fallen. Even if the strait reopens today, Rystad, an energy research firm, estimates it will take until July for oil flows to recover to 90% of pre-war levels. After that, those barrels still need up to two months to reach Asian refineries and be refined into usable fuel. Fuel shortages on petrol station forecourts could persist through the final months of 2026 regardless of what happens at the negotiating table.
• The fertiliser channel compounds the diesel problem. Gulf urea and ammonia move through the same maritime corridors as crude, and the largest Asian buyers, India, Vietnam, Thailand, and Indonesia, are entering the window where fertiliser demand peaks. Indian kharif planting opens in June. Rice transplanting in mainland Southeast Asia is already underway. Higher urea prices land on top of diesel costs that have already pushed irrigation pumping and farm machinery operating costs sharply higher across the region. A large share of Indian groundwater irrigation runs on diesel pumps, so the energy and fertiliser shocks hit the same farmgate cost base simultaneously.
• The second-order effect runs through food prices. Rice accounts for a far larger share of Asian household budgets than wheat does in Western economies, so input cost passthrough and any yield reduction translate quickly into retail inflation and policy pressure. Indian urea is heavily subsidised, which transfers the fiscal cost to the sovereign rather than the farmer in the short run, but the import bill still has to clear in hard currency. Indonesia and the Philippines have less cushion. The variable to watch is China, the swing producer in global urea, which restricted exports during the 2021-22 tightness and could do so again if domestic supply looks thin into the autumn application window.

The Cordoba View

• This view is wrong if the Islamabad talks produce a credible, time-bound reopening framework before end of May, and tanker transits recover to above 15 per day within two weeks of any agreement. At that pace, oil would reach Asian refineries fast enough to ease fuel shortages before the final quarter of the year, and the shortage would not materialise at the scale argued here.

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