The ongoing disruption in global energy markets due to tensions in West Asia could lead to a more severe crisis in refined petroleum products than crude oil, according to a report by PL Capital.
The report highlighted that while crude oil production can be restarted relatively quickly, disruptions in refining capacity can cause prolonged shortages of refined products.
It stated, “While crude production can be restarted relatively quickly in Middle Eastern fields, refinery outages, infrastructure damage, and logistical constraints will likely cause a prolonged shortage of refined products”
It noted that the global oil market is currently facing a rapidly intensifying supply disruption, with an estimated supply gap of around approx. 10 million barrels per day (mb/d) expected by April 1, 2026.
According to the report, the imbalance is more severe in refined products than crude oil. Five key Middle Eastern producers together account for approximately approx. 20 mb/d of crude production and around 5 mb/d of refining capacity, making any disruption in the region highly impactful for global markets.
The report also pointed out that the crisis is already visible in physical markets. For instance, Sydney is estimated to be around 1 million barrels short, highlighting the vulnerability of import-dependent regions with limited refining capacity.
The disruption around the Strait of Hormuz is expected to further aggravate the situation. The report stated that while crude supply may remain relatively manageable, refined product markets are likely to face deeper and more prolonged imbalances.
It explained that refinery outages and infrastructure disruptions can significantly reduce the availability of refined fuels, and even a single large refinery outage can remove substantial product volumes from the market.
India is particularly vulnerable in the current scenario due to its dependence on Middle Eastern LPG supplies. The report noted that around 50-60 per cent of India’s LPG imports transit through the Strait of Hormuz.
With these import flows disrupted, India is facing a severe LPG supply crunch. The situation is considered politically sensitive due to the high share of LPG consumption among households.
The report added that while the government has already begun implementing measures to manage the situation, the loss of imports due to disruption in the Strait of Hormuz cannot be fully compensated. It also noted that refinery-level measures to increase LPG supply are limited.
Overall, the report emphasised that while crude oil availability remains relatively manageable at present, refined product markets, particularly LPG, are witnessing the most severe constraints amid the ongoing crisis.
