Northwest European gasoline refining margins weakened on Wednesday, slipping by roughly $13 to settle near $39 per barrel as international crude climbed above the $100 per barrel threshold.
Physical market activity continued despite the margin contraction. Approximately 8,000 metric tons of E5 gasoline barges were traded, with BP the seller to both Gunvor and Varo. In addition, some 3,000 metric tons of E10 barges changed hands, with Totsa selling to Varo. In the Platts trading window, Exxon sold an E5 barge to Shell.
Market participants attributed the jump in crude prices to an uptick in military conflict between U.S. and Iranian forces. The escalation pushed benchmark oil above $100 per barrel for the first time since late July, a move that analysts say heightened concerns about possible regional supply disruptions and the potential for higher energy costs to feed into inflation for both consumers and businesses.
Beyond near-term price drivers, structural demand outlooks in large consuming markets added pressure to refining dynamics. Sinopec’s research arm projects that China’s oil demand will decline by 600,000 barrels per day in 2026, an 8.9% drop and the third consecutive annual fall. The research group also forecasts that China’s refining capacity could contract by up to 5.5% from 2026 levels by 2030.
Consumption patterns in China are expected to lead the projected decline. Gasoline consumption is forecast to fall 8.7% to 149 million metric tons in 2026, while diesel use is expected to drop 11.4% to 164 million metric tons that year.
The combination of higher crude prices driven by geopolitical developments and a weakening demand outlook in China creates a complex backdrop for European refiners. On the one hand, feedstock costs are rising; on the other, longer-term demand pressures in a major market point to potential oversupply risks down the line.
Traders and market observers will be watching both physical trade flows and geopolitical developments closely as they digest the interplay between tighter near-term supply sentiment and softer demand projections.
Market snapshot:
- Northwest European gasoline refining margins fell by about $13 to $39 per barrel on Wednesday.
- Crude oil breached $100 per barrel for the first time since late July amid increased U.S.-Iran tensions.
- Physical trades included 8,000 metric tons of E5 barges (BP to Gunvor and Varo), 3,000 metric tons of E10 barges (Totsa to Varo), and an E5 barge sold by Exxon to Shell in the Platts window.
- Sinopec research projects China oil demand down 600,000 bpd (8.9%) in 2026, with refining capacity potentially contracting up to 5.5% from 2026 levels by 2030.
- China gasoline and diesel consumption are forecast to fall 8.7% and 11.4% to 149 million and 164 million metric tons respectively in 2026.