At least 1 million barrels per day of diesel and jet fuel output has been lost in Asia after refiners cut runs following disruptions from the Iran war and the effective closure of the Strait of Hormuz. Crude imports to the region are set to fall about 22% in April to 20.4 million bpd, the lowest since 2016, and regional processing is forecast to drop below 29 million bpd in coming months. The shortfall has forced buyers to pay record premiums for alternative cargoes and pushed refiners to favour lighter barrels, creating a sharp divide between exporters with access to medium-sour crude and importers left short. The split is reshaping Asian fuel flows, refining margins and trade patterns through at least the spring season.

Asian refiners have pared back throughput dramatically since late February. The immediate cause was the disruption linked to the Iran war and a knock-on closure of the Strait of Hormuz. That waterway normally carries a high share of the Middle East’s barrels into Asia. When those flows fell, refineries responded by lowering runs and changing the mix of crude they process.

The numbers are stark. Provisional data from Kpler show crude arrivals to Asia are on track to fall about 22% year on year to 20.4 million barrels per day in April. The International Energy Agency said refiners trimmed runs to 29.4 million bpd in March and expects activity to slip to roughly 28.6 million bpd in April and 28.5 million bpd in May. Consultancy Energy Aspects went slightly further, forecasting processing of 28.4 million bpd in April and 28.7 million bpd in May.

How runs fell and what refiners changed

Refiners reacted in two ways. They cut overall throughput. And they shifted the barrels they processed. The switch favoured lighter grades that yield more gasoline and other light products. That left less capacity to make diesel and jet fuel, the two middle-distillate products vital to transport and aviation.

Analysts and refinery sources estimate the change has trimmed diesel and jet output by at least 1 million bpd across Asia. Amir Abu Hassan, senior oil analyst at consultancy FGE NexantECA, said the deepest run cuts would occur in April as the Middle East shortfall persisted. He added alternative barrels were only due to arrive from that week onwards.

State-owned refineries in China led much of the reduction. The IEA put Chinese throughput at 14.0 million bpd in March, down from 15.2 million in February and below the 2025 average of 14.8 million bpd. Chinese operators have curbed exports and raised yields of transport fuels while lowering naphtha output for petrochemicals. Private research firm Horizon Insight estimated Chinese runs fell to about 13.4 million bpd in the week to April 17, from 15.4 million bpd in the week before the conflict began on 28 February.

Winners and losers across Asia

Not all refiners felt the squeeze equally. Those with access to medium and heavy sour grades could maintain higher middle-distillate yields. Others, especially facilities configured for lighter crudes, were forced to run lighter barrels and saw diesel production drop faster.

Singapore, the regional bunkering and trading hub, showed some of the largest utilisation falls. Hassan said Singapore refineries were averaging below 50% utilisation in recent weeks, down from a typical 70%. In Japan and South Korea, he expected utilisation rates to fall to around 65% in late April and early May, versus normal ranges of 70% to 80%. Japanese data for April from the Petroleum Association of Japan put throughput at about 68% of designed capacity.

Mastheads

India also cut runs. Rystad Energy analyst Nithin Prakash said Indian crude processing dipped nearly 13% to roughly 5.0 million bpd in April from February. That move reflected both supply gaps and the economics of competing crude grades.

Trade flows, sanctioned barrels and shadow exports

The supply picture is complicated by alternative trade channels. Refiners have been buying sanctioned Iranian and Russian barrels at sea. Traders are paying record premiums for non-Middle East cargoes that can reach Asian ports. Those purchases have helped bridge some gaps but haven't restored middle-distillate output to pre-conflict levels.

Britannica’s country overview notes that Iran has developed a shadow export system using largely unregulated tankers. It also records that, by early 2026, China had become Iran’s dominant customer, taking more than 90% of Tehran’s oil exports, which averaged about 1.5 million bpd. That flow partly explains why some cargoes continued to move despite sanctions and regional tensions. But the shadow system doesn't fully replace usual, insured freight lines into Asia, and it can constrain the types of crude available to refiners.

The net effect is a market split. Some buyers with flexible refining slates or deep pockets to pay premiums have maintained supplies. Others, including countries and companies that rely on traditional Middle Eastern grades, face shortages of diesel and jet fuel.

Prices, premiums and refining margins

Markets reacted quickly. The squeeze on diesel and jet fuel lifted regional prices and widened cracks between product and crude values. Traders offered higher rates to secure alternative cargoes. At the same time, refiners faced a choice: buy expensive replacement crude or run lighter, cheaper barrels and accept lower middle-distillate yields.

The divergence is altering refining margins across complex plants. Those able to switch yields to maximise diesel and jet production saw relative gains. Others saw refining margins compress. The imbalance also increased incentive for cargo owners to redirect shipments toward the highest bidding buyers, amplifying the gap between the 'haves' and the 'have-nots.'

Airlines and trucking sectors in Asia are likely to feel the strain through higher fuel bills, because jet and diesel prices lead those costs. Cargo costs for refined fuels also affect inland transport and logistics. The IEA and other analysts say refinery run cuts are the key operational channel for the supply shock, not immediate demand destruction.

Some governments have moved to preserve domestic supply. China cut fuel exports to keep more product at home.

That policy reduced the pool of exportable middle distillates available to neighbouring markets. Other authorities have no easy short-term fix because refining configurations and crude availability are structural constraints that take weeks or months to change.

Analysts expect some recovery when alternative barrels arrive or if the conflict eases.

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Energy Aspects forecasts crude processing of about 28.4 million bpd in April, underscoring the near-term strain on diesel and jet supplies across the region.

This article was created with AI assistance.