Global Refining Margins Rise, But Experts Warn of Short-Lived Boost

Global oil refiners have recently experienced a surge in profits due to higher refining margins, providing a temporary boost to an industry that has faced significant challenges. This improvement comes as plant closures have tightened fuel supplies just as summer demand peaks, even though crude oil prices dropped to a four-year low in May after Opec+ eased production cuts earlier than expected. Analysts note that the current strong margins are a result of a tight balance between supply and demand for refined products like gasoline and diesel.

Earlier in the year, major oil companies had predicted a difficult 2025 for refiners, citing weaker demand, the rise of electric vehicles, and increased competition from new refineries in Asia and Africa. However, global refining margins climbed to $8.37 per barrel in May 2025, their highest since March 2024, though still well below the record levels seen in 2022.

Refinery closures in the US and Europe have slowed the growth of global refining capacity, making operational plants more profitable. For example, several major refineries in the US and Europe have shut down or are scheduled to close soon, while unplanned outages have further reduced available capacity. Meanwhile, fuel inventories in key regions have dropped, increasing the need for refinery output as the summer travel season drives up demand.

Despite the current positive outlook, experts warn that this boost may be short-lived. As more refineries ramp up production to take advantage of higher margins and as global economic uncertainty persists, demand growth is expected to slow in the second half of 2025. Analysts suggest that refiners should take advantage of the current favorable conditions, as the market may soon become less profitable.