Market Insights: Refined Products

Refined products are where the oil market meets the real economy. Crude prices make the headlines, but distributors, airlines, utilities and shipowners buy diesel, jet fuel, fuel oil and bitumen — and each of these markets has its own supply chain, seasonality and price drivers. Here is an overview of the developments that matter most to buyers of refined petroleum products.

Refining margins drive availability

The value of a refined product is usually discussed as a crack spread — the difference between the price of the product and the price of the crude it is made from. When cracks are strong, refiners run harder and exporters look for new markets; when they are weak, run cuts and maintenance tighten supply. For buyers, following the crack of the product you purchase often says more about future availability than following crude alone.

Middle distillates: diesel, gasoil and jet fuel

Diesel and gasoil remain the most widely traded refined products, used in road transport, agriculture, mining, construction and power generation. Most import markets require ultra-low sulphur grades such as EN590 10 ppm. Jet fuel (Jet A-1) comes from the same part of the barrel, so refiners shift output between diesel and jet depending on relative prices — which is why the two markets tend to move together. Heating demand in the northern hemisphere adds seasonal pressure from autumn onwards.

Fuel oil and marine fuels

Since the global 0.50% sulphur cap took effect in 2020, demand for high-sulphur fuel oil from shipping has depended largely on vessels fitted with exhaust gas scrubbers, while very low sulphur fuel oil (VLSFO) has become the mainstream marine fuel. High-sulphur grades still find outlets in power generation in some regions and as refinery feedstock. With either grade, specification, viscosity and stability testing matter as much as price.

Bitumen, base oils and specialty products

Bitumen demand follows road building and infrastructure spending and is strongly seasonal in many countries. Base oils and other specialty streams are smaller markets with fewer producers, where the reliability of a supplier's allocation can matter more than the headline price.

Supply is travelling further

New export-oriented refineries in the Middle East, Asia and Africa, together with closures of older capacity elsewhere, mean that a growing share of refined products crosses an ocean before it is used. Longer voyages expose cargoes to freight volatility, route disruption and more complex documentation. Buyers increasingly value suppliers who can manage the whole chain — from refinery allocation to inspection at discharge.

How prices are set

Most physical cargoes of refined products are priced against assessments published by independent price reporting agencies, such as Platts or Argus, plus or minus a negotiated premium or discount. The pricing period — for example, an average of quotations around the bill of lading date — matters as much as the premium itself and should be agreed precisely in the contract.

What we watch

• Product cracks and refinery maintenance in the main export regions
• Inventory levels at the major trading hubs
• Freight rates and route disruptions affecting long-haul cargoes
• Changes to fuel specifications and emission control areas
• Sanctions developments that redirect product flows

This article is general market commentary and does not constitute investment advice.