According to WPB, the global oil market has entered a more dangerous phase in which disruption is no longer concentrated around a single producer, refinery system or shipping route. Countries affected by conflict, sanctions or major supply disruption in 2026 accounted for more than 43% of global oil production based on 2025 output, while the conflicts in the Gulf and Ukraine have disrupted about one-tenth of global refining capacity. The result is a downstream system with less spare capacity, depleted inventories and stronger competition over how every available barrel is processed.
The 43% figure requires an important distinction. It does not mean that 43% of world oil production has disappeared. Countries affected by the Gulf conflict, the Russia-Ukraine war, instability in Libya and restrictions on Venezuela collectively produced around 45 million barrels per day based on 2025 data. Much of that production continues to flow. The significance is that an unusually large share of global supply now originates in countries where production, refining, exports or logistics are exposed to conflict-related disruption.
The current disruption to Gulf oil supply is estimated at around 5 million to 7 million barrels per day. Saudi Arabia and other exporters have increased the use of alternative routes, including pipelines and loading points outside the Strait of Hormuz, while some cargoes continue to move through less transparent maritime arrangements. These measures have prevented an even larger loss of crude supply, but they cannot fully replace the refining and product-export capacity that has also been damaged or restricted.
That distinction is critical for bitumen. A crude barrel reaching the market does not automatically restore the supply of diesel, jet fuel, fuel oil or road bitumen. Crude must first reach an operating refinery with the appropriate configuration, feedstock compatibility, conversion units and logistics. The world currently has less effective processing capacity available to perform that task.
Global refinery crude throughput reached approximately 80.9 million barrels per day in July, nearly 5 million barrels per day below the level recorded one year earlier. The International Energy Agency expects global refinery runs to decline by an average of 2.5 million barrels per day in 2026. Middle Eastern product exports remain constrained, Russian refineries continue to face repeated damage, and several Asian refiners have operated at reduced rates.
The difference from earlier stages of the crisis is that the global refining system is losing redundancy. A temporary outage is manageable when other refineries have spare capacity, inventories are comfortable and replacement products can move freely between regions. The same outage becomes more serious when several refining centers are simultaneously constrained and remaining plants are already operating aggressively.
The United States illustrates this pressure. Refinery utilization has remained above 95% for more than 11 consecutive weeks, the longest sustained period at those levels in more than 25 years. U.S. refiners have increased crude processing and fuel exports to compensate for shortages elsewhere, but prolonged maximum utilization also raises the risk of equipment failure and unplanned maintenance. Some scheduled maintenance has already been postponed into late 2026 or 2027.
This matters because global refinery output is already running below demand. Remaining high-performing plants are increasingly being asked to compensate for capacity lost elsewhere. That reduces the safety margin available if another major refinery suffers an unexpected outage.
For the bitumen industry, the importance of this situation lies at the bottom of the refinery barrel. Bitumen is not produced independently from the rest of the refinery. Suitable heavy streams, particularly vacuum residue, can be directed toward road bitumen, fuel oil or additional conversion depending on refinery configuration and economics. Complex plants equipped with cokers, hydrocrackers, visbreakers or other upgrading units can extract more value from heavy fractions by converting them into lighter products.
When diesel and other transportation-fuel margins are exceptionally strong, preserving suitable heavy material for bitumen can carry a higher opportunity cost. Refiners may obtain more value from processing or blending those streams elsewhere, provided their equipment allows them to do so.
This does not establish that bitumen production is falling by the same percentage as global refining capacity. A 10% disruption to refining capacity cannot be translated into a 10% reduction in global bitumen output. Refinery configurations differ dramatically, and many plants affected by the current crisis do not necessarily produce significant quantities of paving-grade material.
The stronger conclusion is that the system has become less flexible. With fewer operating refineries, each remaining source of vacuum residue and heavy feedstock becomes more important. If transportation fuels offer stronger margins, bitumen has to compete for material inside a refinery system already under pressure to maximize diesel, gasoline and jet-fuel production.
Inventories make the situation more difficult. Global observed oil stocks fell by another 69 million barrels in July and slipped below 7.9 billion barrels. Since the beginning of the Gulf conflict, observed inventories have declined by around 410 million barrels, equivalent to an average draw of approximately 2.7 million barrels per day.
Emergency reserves have also carried a substantial part of the burden. IEA member countries agreed in March to make 400 million barrels available in the largest coordinated emergency stock release in the organization’s history. By August, those releases were largely complete even as global commercial and observed inventories continued to decline.
This changes refinery behavior. When inventories are abundant, a refiner or trader has more room to optimize product output gradually. When stocks are being drawn down and middle distillates are scarce, there is stronger pressure to produce the fuels that markets require immediately.
That is one reason diesel margins remain so important for bitumen. Exceptionally high middle-distillate margins provide a financial signal that refinery capacity is worth more when directed toward transportation fuels. The effect varies by plant, but the direction of the incentive is clear. The heavier the pressure on diesel and jet-fuel supply, the greater the economic value of refinery conversion flexibility becomes.
This can influence bitumen through three channels.
The first is feedstock generation. Lower overall crude throughput generally means a smaller total pool of atmospheric and vacuum residues. The relationship is not one-for-one, but less crude processing reduces the potential feedstock base from which bitumen can be produced.
The second is allocation. Even when sufficient vacuum residue exists, refiners may have alternative uses for it. Strong fuel-oil values or attractive conversion margins can increase competition between paving-grade production and other heavy-product pathways.
The third is replacement cost. If open-market bitumen availability declines at one refining center, buyers may have to reach farther for cargoes. Longer voyages, additional handling and tighter specialized tanker availability can increase landed costs even if the FOB price at the replacement origin appears competitive.
This effect can be particularly important in Asia and the Middle East. Buyers in India, Southeast Asia and East Africa have traditionally been able to compare several nearby Gulf and Asian supply sources. Simultaneous constraints on Gulf refining, Russian production and parts of Asian refining reduce the number of alternatives capable of responding quickly to a shortage.
Bulk bitumen faces the additional limitation of specialized logistics. Heated cargoes cannot simply be transferred to any available petroleum tanker. Suitable vessels require heating systems, compatible tanks and appropriate pumping equipment. A tightening refinery system therefore meets a shipping market that already has less flexibility than crude or conventional refined products.
Packaged bitumen offers more routing options through drums, jumbo bags and containers, but it does not escape the underlying production economics. A refinery must still make the binder before it can be packaged.
The current crisis is therefore becoming more structural for heavy products not because the world is running out of crude, but because the chain between crude production and finished products has lost part of its operating buffer.
The difference is important. Oil fields can sometimes restore production relatively quickly once export constraints ease. Damaged refinery units may require months or years to repair. Replacement equipment can be difficult to source, particularly in sanctioned markets, while building entirely new refining capacity requires large investments and long construction periods.
The same principle applies to inventories. A pipeline or tanker can restore crude flow relatively quickly, but depleted stocks of diesel, fuel oil or bitumen have to be physically rebuilt through refinery production. That process takes time and competes with current consumption.
This is what separates the latest development from the earlier argument that refining was simply “tight.” The new data show the scale of the system exposed to disruption: roughly 43% of global oil production originates from affected countries, about a tenth of global refining capacity has been disrupted by the Gulf and Ukraine conflicts, and the remaining system is operating with substantially lower inventories.
For bitumen traders, this means crude price alone is becoming an increasingly incomplete market signal. Brent can decline while refinery economics remain extremely strong. Crude flows can partially recover while product inventories continue falling. A refinery can regain access to feedstock while still prioritizing diesel or jet fuel over heavy products.
The indicators that matter increasingly include refinery utilization, outages, diesel cracks, fuel-oil values, vacuum-residue economics, refinery configuration and regional product inventories.
There is still no evidence of a corresponding 10% collapse in global bitumen production, and such a conclusion would be unsupported. The risk is instead that the world has fewer operational pathways available to produce, replace and transport bitumen when an individual market tightens.
That loss of flexibility can keep paving-grade prices firmer than crude prices would normally imply. If Gulf refining recovers, Russian processing stabilizes and global inventories begin to rebuild, some of the pressure on heavy products could ease. Refiners would have greater freedom to optimize output and buyers would regain more alternative sources.
If those conditions do not improve, the global bitumen market may increasingly operate in an environment where refinery capacity itself carries a scarcity premium.
The latest numbers therefore point to a broader change in the market. The issue is no longer only whether enough oil exists. The world must also have enough functioning refineries, in the right locations, with the right configurations, to turn that oil into the products buyers actually need.
For bitumen, that means competition for the bottom of the barrel is becoming more important precisely when the global refining system has less capacity available to absorb another shock.
By WPB
News, Bitumen, Global Refining, Refinery Capacity, Vacuum Residue, Heavy Products, Diesel Margins, Fuel Oil, Refinery Economics, Oil Supply, Asphalt, Landed Cost
