Crude Oil Analysis: Brent Targets $100 as Refining Margin Hits Record
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Key Points:
- Refining margins at a 24-year record - $63/bbl vs $20-27 pre-war. The week's hardest number and it's invisible in the crude price.
- The war now has two straits. Houthi naval blockade of Bab el-Mandeb - ~7 mb/d transited it in June - stacked on Hormuz, and it targets Yanbu, the very bypass route that kept Saudi barrels flowing in round one.
- The August catalyst: buyers return as the cushion runs out. IEA's 400 mb release (~2.5 mb/d of extra supply) ends in four weeks, exactly as China - crude imports at 6 mb/d in June, lowest since 2016, vs a 10.4 mb/d 2025 average - is forced back into the market to meet its own export conditions.
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A second round of hot war has duly become a tailwind for upside on oil prices since last week. What has perhaps been hiding in plain sight is the rally in refiners margins. Pre-war, the refiners profit range was $20 to $27. It is now trading at $63. The last time refining margins looked like this, Russia had just invaded Ukraine and Europe was scrambling for diesel. That was the record. We have never been at refiners margins this high.