Crude Tightness Pushing Refining Margins Lower

It's a funny market. Every time I see a post or tweet pointing to falling refining margins, I can't help but shake my head. The Saudi/Russia voluntary production cut is targeting crude supplies, and so with the underlying crude tightness and no change in end-user demand, refining margins will fall, assuming all else equals.

Unlike 2022 when there was a shortage of refining capacity, which resulted in especially high refining margins, this time around, crude is leading the way, so refining margins will lag.

People also forget that throughout 2023, global refinery capacity expanded by ~2 million b/d.