The Middle East conflict effectively closed the Strait of Hormuz and triggered a significant crude oil supply crisis, keeping crude oil and refined product prices elevated throughout the second quarter
The supply disruption prompted a reorganization of supply routes and increased releases of crude oil from strategic reserves in several countries, including the U.S. Crude oil inventories in the U.S., including the strategic reserve, reached the lowest level in more than forty years in the second quarter. Increased U.S. exports from the reserve have helped temper global crude prices, which would likely have been higher otherwise.
Similarly, U.S. exports of jet and distillate fuel reached record highs, at the expense of domestic inventories, which declined over the second quarter. Reduced production of refined products, in part due to spring refinery maintenance, and lower North American refinery capacity from last year’s refinery closures also contributed to lower refined product inventories.
The ongoing Russia/Ukraine war, with a recent increase in drone attacks by Ukraine on Russian oil infrastructure, further contributed to declining global refined product inventories. Declining gasoline and diesel inventories in the second quarter contributed to elevated refined product crack spreads. Along with higher crude oil prices, retail prices in the second quarter climbed to multi-year highs.
Market outlook
Looking ahead to next year, we expect retail petroleum prices to trend lower; however, the path to lower prices could be hampered by increased volatility, as uncertainty remains about whether the conflict in the Middle East will be resolved. Crude oil prices began to decline in June as the U.S. and Iran reached a Memorandum of Understanding regarding the conflict, which had increased vessel traffic through the Strait of Hormuz; however, the conflict between the two countries escalated in July, with traffic through the Strait once again reduced.
Download the full report
For more detailed analysis, data tables, charts, and price forecasts, download the full Q2 2026 Petroleum Pricing Report from Kalibrate.
