Gulf crude flows are recovering, but diesel remains the tighter market

The crude recovery is real, although how complete it looks depends on what is being measured. Kpler data cited by CNBC on 29 September put the seven-day average of flows through Hormuz at 13.2 million barrels a day, about 77% of the roughly 17 million barrels a day that moved through the strait before the conflict began on 28 February. Total Gulf exports look stronger once Saudi barrels rerouted by pipeline to Yanbu are added, and Goldman Sachs has estimated total Gulf exports at 23.3 million barrels a day including untracked shipments, according to a Reuters poll reported by OilPrice.com on 1 October. That difference in measurement explains why some reports describe Gulf crude flows as effectively back to normal while others describe Hormuz itself as still well short of it.

The recovery also remains exposed. CNBC reported on 1 October that at least three tankers had come under attack this week while attempting to transit Hormuz, citing maritime security agencies.

Refined products are a separate matter. The same CNBC report noted that fuel shipments from the Middle East are still constrained and that Iran and its Houthi allies have attacked refineries in the region. A pipeline can often be repaired and restarted within weeks. A damaged refinery, with its interconnected processing units, typically takes longer to return to full output, and crude moving freely past a refinery does not become diesel until that refinery is running.

The first pressure is the constraint on Middle East product exports described above, which removes supply from a region that normally ships diesel and jet fuel to Europe, East Africa and Asia.

The second is Russia. Moscow extended its ban on diesel, marine fuel and gasoil exports to producers on 8 July 2026, after Ukrainian drone strikes cut refinery runs, and later extended it to 30 September. Bloomberg reported on 21 September, and TASS on 28 September, that the government intended to extend it beyond that date, possibly through October. At the time of writing we have not confirmed a published decree, so this should be treated as reported intent rather than an implemented measure. Separately, exports of diesel by non-producers and of gasoline remain banned until 31 January 2027. Before the latest escalation, Russia accounted for roughly a tenth of global diesel supply.

For buyers in the European Union and the United Kingdom, Russian refined products were already prohibited under sanctions, so the direct effect falls on the markets that had continued to buy Russian diesel. The indirect effect reaches everyone, because those buyers now compete for the same non-Russian cargoes.

The third pressure is policy risk in the United States, the world's largest diesel exporter. Politico reported on 23 September that the White House was preparing a 90-day ban on diesel exports. The White House denied the report, and Energy Secretary Chris Wright argued that a flat ban could raise gasoline and jet fuel prices, yet President Trump said on 28 September that a ban was being considered very seriously, according to CNBC. S&P Global has estimated that a full ban could force US refiners to cut run rates by up to 10%. Nothing has been implemented. Even so, a buyer relying on US Gulf Coast diesel for Latin American or European delivery now carries a policy risk that barely existed six months ago.

There are smaller signals pointing the same way. Reuters, citing unnamed sources, reported that Chinese refiners had cancelled some gasoline and jet fuel exports planned for October. That concerns other products rather than diesel, but it suggests exporters are prioritising home markets.

The gap between the price of a refined product and the price of the crude it is made from is known as the crack spread, and it broadly reflects the margin a refiner earns for turning crude into that product. When crude supply is the constraint, crude and products tend to move together. When product supply is disrupted independently, as it is now, the crack spread can widen sharply, and a buyer watching Brent alone will underestimate both the cost and the availability risk of the diesel they actually need.

This is why diesel and gasoil exposure is better priced and hedged against the relevant product benchmark, such as ICE Gasoil or the regional price assessment referenced in the contract, rather than against crude.

The first question is origin. A seller's willingness to deliver depends on its supply source being able to export, and in the current market export permission is itself a variable. Buyers should understand where the product originates, whether that origin faces any pending policy decision, and whether the seller has alternative sources if it does.

The second is contract language. Change-of-law, export licence and force majeure clauses determine who bears the cost if an export restriction lands between nomination and loading. These clauses are often treated as boilerplate, and this is a period in which they deserve a careful read with legal counsel.

The third is counterparty scrutiny. When genuine product is scarce, offers of large monthly volumes of EN590 at a discount to the market should attract more questions, not fewer. A credible seller should be able to evidence the supply source, the chain of title and the inspection arrangements. Origin documentation matters especially in jurisdictions where Russian-origin products are prohibited, and buyers remain responsible for complying with every sanctions regime that applies to them.

For sellers, the same logic runs in reverse. Buyers who understand these risks will ask about origin and contingency, and sellers who can answer clearly will place cargoes more easily.

Several developments could ease the squeeze. Russia could lift its producer ban if its domestic market stabilises. A durable agreement between Washington and Tehran would reduce the risk to tankers and Gulf refineries, although Iran's offer to reopen Hormuz on conditions was rejected by President Trump on 27 September, according to CNBC. The US administration may decide against any export restriction. Record prices may also reduce demand, particularly in freight and agriculture. The seven OPEC+ countries operating voluntary cuts meet on 4 October, but a change in crude quotas would do little in the short term to ease a shortage of refined product.

The broader lesson is one we return to often in both our brokerage work and our broker training. The benchmark headline is a starting point. The commercial question is always which barrels, from where, under what restrictions, delivered when.