By Robert Harvey, Shariq Khan and Nicole Jao
LONDON (Reuters) -Refiners across the globe are reaping unexpected profits from producing key fuels in recent weeks, offering an ailing sector respite before an anticipated weakening later this year, as plant closures have tightened fuel supply needed to meet peak summer demand.
The strength in fuel markets contrasts with crude oil prices falling to a four-year low in May, after OPEC+ unwound output cuts faster than planned. It also suggests demand has so far proved resilient despite ongoing concerns about the impact of tariffs.
“Margins are strong because the balance of products – supply and demand – is still tight,” said Sparta Commodities analyst Neil Crosby.
Refining margins reflect the profits a plant makes from processing crude oil into fuels such as gasoline or diesel.
Just a few months ago, oil majors were warning 2025 would be a bleak year for refining. TotalEnergies and BP reported lower first-quarter profits because of weaker earnings from fuels.
Refiners have broadly struggled with waning demand from economic slowdowns, an increasing uptake of electric vehicles, and competition from newer plants in Asia and Africa.
Global composite refining margins reached $8.37 per barrel in May 2025, according to consultancy Wood Mackenzie, their highest since March 2024, but still much lower than the $33.50 average in June 2022 during the post-pandemic demand recovery and in the wake of Russia’s invasion of Ukraine.
Closures in the United States and Europe have slowed global net refinery capacity growth below demand growth, helping to make operational refineries relatively more profitable.
Global diesel supply could decline by 100,000 barrels per day (bpd) year-on-year in 2025, while demand will drop 40,000 bpd, according to energy consultancy FGE. Gasoline supply will decline by 180,000 bpd, with demand rising by 28,000 bpd.
“We are therefore seeing a tighter product market for key transport fuels which is exerting upwards pressure on margins, much to the relief and joy of regional refiners,” said FGE’s head of refined products Eugene Lindell.
Refiners of all fuel-producing configurations are benefitting from current margins, FGE’s head of refining Qilin Tam added, as light fuels such as gasoline and heavy products like fuel oil have recently increased.
In Europe, closures include Petroineos’ Grangemouth refinery in Scotland and Shell’s Wesseling facility this year, as well as a part closure of BP’s Gelsenkirchen refinery.
In the U.S., LyondellBasell’s Houston refinery was shuttered this year, while Phillips 66’s Los Angeles refinery and Valero’s Benicia refinery are set to close in October 2025 in April 2026 respectively.
