Soaring crude transport costs are pushing European refining margins back into negative territory and increasing the likelihood of throughput cuts, according to J.P. Morgan analysis reported by Rigzone. The bank said delivered crude prices had revisited spring highs, but attributed the latest pressure to shipping costs rather than the physical shortage of oil that drove April’s market.
Analysts including Natasha Kaneva, J.P. Morgan’s head of global commodities strategy, linked the squeeze to a rise in Middle Eastern shipments through the Strait of Hormuz. Flows increased from about 7.5 million barrels per day in July and August to 12 million bpd in September. That month, 766 of the world’s 923 very large crude carriers were employed, while 124 vessels were effectively excluded from much of the international market by US restrictions on Iranian oil.
Longer voyages to avoid risky areas and ship-to-ship transfers lasting up to 10 days have further reduced fleet productivity, the analysts said. Atlantic Basin exporters have increasingly turned to smaller tankers as Middle Eastern demand absorbs VLCC capacity. Outside the Middle East, Aframax employment was 141 vessels above the 2025 average, a 23% increase, while Suezmax employment rose by 52 vessels, or 11%.
J.P. Morgan put Middle East-to-China VLCC transport costs at around $35 per barrel, against $3 in early 2026. US Gulf Coast-to-China freight reached $41 per barrel, compared with $6 before the war. For Chinese buyers, the bank estimated delivered Middle Eastern crude at roughly $143 per barrel, versus $126 for Brazilian supplies and $131 for US Gulf Coast barrels.
Exceptionally strong product cracks had helped refiners accommodate rising freight bills, but that buffer was weakening, the bank warned. Northwest European hydro-skimming margins had dropped sharply, indicating difficulty passing higher crude acquisition costs into product prices. Less complex plants with fewer options to change feedstocks face particular pressure to reduce runs. Weaker margins could also curb charterers’ willingness to pay elevated freight rates despite limited vessel availability.
Separate Macquarie analysis carried by Rigzone said refinery outages in Asia, the Middle East and Russia continued to constrain gasoline, diesel and jet fuel supplies despite easing crude disruptions. Its strategists highlighted G7 calls for higher refinery utilisation and coordinated maintenance, alongside a 100 million barrel strategic stock release over four months that included an early release of diesel inventories.