Refiners Gain Short-Term Boost as Margins Hit 14-Month High

Global oil refiners saw profit margins climb to a 14-month high in May, lifted by plant closures in Europe and the U.S., lower fuel inventories, and peak summer demand. The rally has provided a reprieve for a sector expecting weaker returns later this year.

Wood Mackenzie reported global composite refining margins at $8.37 per barrel in May 2025, their highest since March 2024, but well below the $33.50 average in June 2022 during the post-pandemic surge. Analysts say closures and outages have tightened supply, pushing margins higher despite crude prices hitting a four-year low after OPEC+ accelerated output increases.

Europe has seen shutdowns at Petroineos’ Grangemouth plant, Shell’s Wesseling facility, and part of BP’s Gelsenkirchen site. In the U.S., LyondellBasell closed its Houston refinery, while Phillips 66’s Los Angeles and Valero’s Benicia refineries are set to shut later in 2025 and 2026. Unplanned outages at Nigeria’s Dangote and Mexico’s Olmeca refineries, along with an Iberian power failure that cut 1.5 million barrels per day of capacity, further squeezed supply.

Fuel inventories in OECD countries dropped by 50 million barrels between January and May, according to JPMorgan. This decline, combined with strong gasoline and jet demand in the U.S. and seasonal heavy fuel oil consumption in the Middle East, has supported margins. Phillips 66 and Marathon Petroleum executives both noted tightening gasoline stocks and steady demand growth in their earnings calls.

Analysts caution, however, that current strength may be short-lived. The International Energy Agency projects global demand growth of 650,000 barrels per day for the rest of 2025, down from nearly 1 million in the first quarter. Rising production as plants capitalize on higher margins, and the impact of trade disputes could erode profitability.

“Refiners should be hedging everything now,” said one veteran trader. “This is as good as it gets.”