18/04/2026
Oil & Fuel Markets Update - courtesy of a very supportive supplier we do business and work with:
Geopolitical tensions remain elevated despite tentative progress in US–Iran negotiations, with US President Donald Trump signaling a potential deal while Iranian officials continue to stress that major issues remain unresolved. This divergence in interpretation is now shaping the Strait of Hormuz outlook, where both sides have announced a conditional reopening of commercial shipping under the ceasefire framework.
Iranian Foreign Minister Abbas Araghchi confirmed the Strait is “completely open” for the duration of the ceasefire, subject to the dissolution of the US’s naval blockade and the success of the 10-day Israel–Lebanon ceasefire. Whilst President Trump has expressed the view that the Strait of Hormuz will remain open permanently, Iranian officials argue the agreement is limited to a cessation of hostilities, with core issues such as the nuclear programme still unresolved. Analysts note Tehran continues to insist that uranium enrichment is non-negotiable and that its highly enriched stockpile will not be exported, leaving key sticking points in place.
Early vessel movements have begun after months of disruption. Given the Strait typically carries around 20% of global oil flows, even partial reopening has eased immediate supply concerns and driven Brent crude more than 10% lower intraday.
However, flows remain fragile. A significant tanker backlog persists and shipowners are cautious amid the risk of renewed restrictions or breakdown in talks, particularly given the unresolved nuclear and security agenda between Washington and Tehran.
Overall, while markets have reacted quickly to easing near-term supply risk, the competing interpretations of the ceasefire and unresolved core negotiations continue to underpin a material geopolitical risk premium in oil prices.
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Global Supply and Demand Outlook
Extended Timeframe for Oil Supply Recovery
Latest IEA estimates indicate that the Middle East conflict has resulted in as much as 13 million barrels per day of oil production being shut in or taken offline. This disruption is driven not only by storage constraints, but more significantly by damage to around 80 oil and gas production facilities across the region.
The total replacement cost of the impacted energy infrastructure is estimated at approximately US$58 billion, with current assessments suggesting it could take up to two years to restore meaningful production capacity.
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Chinese Refinery Runs Fall in March
China’s crude processing activity declined in March, with refinery throughput falling 2.2% month-on-month to 14.52 million barrels per day. The most acutely impacted products were gasoline and jet fuel, which fell by 2.95% and 3.72%, respectively. Contrarily, diesel fuel production rose by 0.88%, driven by commitments to industrial energy security, and the commercial incentive of record diesel-gasoline regrades.
This was widely anticipated following the mid-month announcement that the nation’s largest refiner – Sinopec – would be cutting crude processing rates by 11–13%.
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Oil Demand Forecasted to Decline to Lowest Levels Since Covid
Refinery outages and supply disruptions have led to cuts of approximately 6 million barrels per day in processing rates across the Middle East and Asia in April to date, with global refinery runs expected to decline further into 2026.
The IEA now forecasts a sharp deterioration in oil demand, including a 2.3 million barrel per day year-on-year decline in April and a 1.5 million barrel per day drop in the second quarter, reversing its previous expectation of growth for 2026. OPEC+ has taken a contrarian view, maintaining its previous forecast for global oil demand growth at 1.38 million barrels per day, despite ongoing supply disruptions.
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Australian Commercial Fuel Price Drivers
• Oil price: Brent crude closed the week at US$91.87 per barrel, down 3.50% since last week’s close
• International wholesale fuel prices: Diesel decreased to US$170.31 per barrel (down 18.96%), Jet Fuel decreased by 1.8%, Gasoline decreased by 8.9%
• Australian dollar: AUD moved up 1.40% to US$0.7170 (RBA 4pm rate)
• Shipping costs: Freight to Australia increased by 15.4%, now ~4.6x standard levels
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Industry News
Limited Operations Resume at the Geelong Refinery
A fire at the 120,000 barrel per day Geelong refinery that started on Wednesday night was extinguished by Fire Rescue Victoria after 13 hours. The fire, caused by equipment failure, was contained to a small area within the gasoline processing section. Authorities have reported no immediate impact to fuel supply, with any lost production expected to be offset through the fuel supply program and imports.
Following the incident, Prime Minister Albanese announced that gasoline processing will be temporarily restricted to 60% of capacity, while diesel and jet fuel output will be limited to 80% as a precautionary measure.
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Western Australia Establishes Strategic Petroleum Reserve
The WA Government has purchased 4 million litres of diesel from Cambridge Gulf to establish a state-controlled reserve, stored in Wyndham in the Kimberley region.
While the volume is unlikely to materially affect broader supply dynamics, it represents a practical step toward improving regional fuel resilience and may set a precedent for other states.
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Japan to Provide $10 Billion Energy Finance Facility
Japan plans to establish a US$10 billion financial support framework to help Asian countries secure alternative crude oil supplies following recent disruptions.
In the short term, this initiative may have mildly inflationary implications for Australian fuel prices, as increased regional competition for supply tightens the Asia-Pacific market.
