S&P Global Energy – Firstpost

Global refined fuel markets are entering a full-scale demand crisis as prolonged disruption in the Strait of Hormuz forces refiners and consumers into an unprecedented adjustment cycle, according to a new analysis by S&P Global Energy.

The report warns that global demand destruction for refined products in the second quarter of 2026 could be more than twice as severe as the weakest quarter during the 2008–09 “Great Recession,” highlighting the scale of stress now rippling across global energy markets.

“We have now crossed the Rubicon,” said Daniel Evans, Vice President and Global Head of Fuels and Refining Research at S&P Global Energy. “Given the lags between any potential restart of flows through the Strait of Hormuz and the arrival of meaningful relief to product supply, the market equation cannot be solved without demand acting as the balancer.”

According to the analysis, global refinery runs are now projected to decline by 5.2 million barrels per day (b/d) year-on-year in the second quarter and 2.7 million b/d in the third quarter. On an annual average basis, global crude runs are expected to fall by 1.9 million b/d in 2026.

The collapse in refinery activity is expected to be mirrored by sharp declines in refined product demand. S&P Global Energy estimates refined fuel demand will fall by 4.4 million b/d in the second quarter and 2.2 million b/d in the third quarter compared with the same period last year. Annual average refined product demand is projected to decline by 1.8 million b/d in 2026.

The projections are based on S&P Global Energy’s base-case assumption that the effective closure of the Strait of Hormuz continues through May before oil flows begin returning gradually.

Second-quarter product demand estimates have already been revised lower by 4.7 million b/d compared with pre-crisis expectations. The report noted that while inventory drawdowns are helping cushion part of the supply shock, they are insufficient to offset the magnitude of lost flows and delayed logistical recovery.

“The demand crisis of 2026 started in the Middle East and Asia,” said Karim Fawaz, Executive Director, Fuels and Refining at S&P Global Energy. “The longer it endures and the larger the market call on demand reduction becomes, the more likely it is that large demand declines spread to other regions, either via higher prices or physical availability.”

Asia and Europe are expected to bear the brunt of the refinery run cuts outside the Middle East due to their heavy dependence on disrupted crude flows and intense competition for replacement barrels. Together, the two regions account for 3.1 million b/d of the anticipated second-quarter refinery run decline.

Meanwhile, North America, Latin America, and Africa remain relatively better insulated for now. However, S&P Global Energy cautioned that the upcoming summer travel and driving season in the United States and Europe could place additional strain on inventories and fuel prices.

The analysis warns that even if oil flows through Hormuz resume immediately, operational bottlenecks, shipping delays, and refining constraints could delay meaningful market normalization by months rather than weeks. As a result, the burden of balancing the market is increasingly shifting from supply recovery to outright demand destruction.