JPMorgan: Crude Supply No Longer the Core Issue; Refining and Russia Emerge as the Biggest Variables
Miles Bennett
JPMorgan commodities head Natasha Kaneva says markets have adapted to Hormuz crude-flow swings; the real uncertainty is whether global refining can process the oil in time — Middle East refinery damage, China's policy-driven restart pace, and Russia's capacity gap form three unresolved variables.
Why is crude supply no longer the core issue?
Fresh U.S.–Iran strikes have again cut Hormuz transit volumes, yet markets have gradually adapted to the pattern.
This means → traders now assume crude barrels "can vanish fast and return almost as fast," so supply-side shocks are largely priced in.
In plain terms = getting oil out of the ground is no longer what keeps people up at night. Turning it into gasoline and diesel is.
How badly are Middle East refineries damaged?
JPMorgan has tracked over 30 attacks on refineries and processing facilities across the Middle East, but the actual physical damage remains hard to assess.
The bank's base case assumes only 250,000 barrels/day of refining capacity stays offline through year-end — and it flags confidence in that estimate as "low."
This reflects a deeper unknown: the region holds roughly 11.7 million barrels/day of refining capacity, and the share that can restart immediately is the single biggest question mark.
When can Chinese refineries come back online?
Chinese refinery utilization has dropped by roughly 3 million barrels/day. JPMorgan says the cut is policy-driven, not demand-driven.
Restarting requires a chain of prerequisites: Hormuz reopens → Beijing confirms flows are fully stable → refined-product export quotas are relaxed → state-owned refineries ramp utilization and boost crude imports.
This means → JPMorgan sees low probability this process completes before September. The recovery window likely falls in autumn or later.
Why is Russia the "most underappreciated" refining risk?
Ukrainian drones have sustained strikes on Russian refineries, tank farms, and secondary conversion units — equipment that reprocesses heavy oil into gasoline and diesel. June utilization fell to 3.8 million barrels/day, down roughly 1.5 million barrels/day from the start of the year.
This means → Russia alone accounts for about 20% of the global refinery utilization decline of 8.2 million barrels/day this year.
In 2026, strikes on refineries supplying Moscow made up 39% of all attacks, up from 22% in 2025 — the targeting strategy has clearly tilted toward the capital's supply chain.
How severe is Russia's domestic fuel shortage?
Shortages have spread from the consumer level to operations: even regions with local refineries see fuel diverted to Moscow, causing days-long queues, rationed sales, and station shutdowns.
Some independent stations are charging over 50% above normal retail prices. Agriculture, public transit, logistics, and small businesses are all affected.
In plain terms = Russia is not "managing a refining system." It is managing a fuel shortage at the margin — importing gasoline, permitting lower-grade Euro-3 fuel in place of Euro-5, and tightening export controls, all as stopgaps.
What is the next key checkpoint?
Russia's southern agricultural belt begins its summer grain harvest in August, when diesel demand spikes seasonally. Whether the refining gap can close by then remains unresolved.
This means → whether global refining capacity can meaningfully recover before autumn will determine the direction of crack spreads — the price gap between refined products and crude oil.
This reflects a shift in the market's core pricing logic: the question is no longer "is there oil?" but "can it be refined?"
Content is for reference only, not financial advice.