According to WPB, the latest operating results from ExxonMobil and Chevron indicate that diesel and other high-margin transport fuels will remain the main priority for major refineries during the second half of 2026. Both companies operated their refining systems at unusually high levels during the second quarter, yet they also warned that global supplies of diesel and other refined products are likely to remain restricted. For the bitumen market, the significance is clear: strong refinery throughput does not automatically guarantee greater availability of paving-grade material.
ExxonMobil reported record second-quarter diesel production, supported by high utilization at its United States Gulf Coast refineries. The company’s adjusted Energy Products earnings increased to approximately $4.1 billion, compared with about $2.8 billion in the previous quarter. Chevron separately reported record crude-unit throughput at its United States refineries, where utilization reached 97% and daily processing exceeded one million barrels. These results show that refiners are responding to high fuel margins by operating close to their practical limits.
The high processing rates have not removed the underlying shortage. Executives from both companies said diesel, heating oil and other refined-product markets could remain tight through the third quarter and potentially beyond. Falling fuel inventories, reduced Chinese exports, Russian refinery outages and disruption to Middle Eastern energy flows have restricted the availability of replacement cargoes. This has kept product prices high even as refineries in the United States and other regions increased production.
The current refining environment is particularly favorable for middle distillates. European diesel margins reached record levels in July, while distillate and jet-fuel crack spreads in the United States were more than double their levels of a year earlier during the second quarter. United States refineries processed the largest amount of crude for a second quarter since 2019, even though national refining capacity was higher in that earlier period. The operating response has therefore been substantial, but demand and international supply losses have continued to support margins.
This creates a commercial conflict for the bitumen supply chain. Refineries do not normally choose between producing one barrel of diesel and one barrel of bitumen through a simple direct substitution. Diesel is primarily recovered from lighter and middle sections of the crude barrel, while bitumen is made from the heaviest residue remaining after atmospheric and vacuum distillation. However, the value of diesel affects how the entire refinery is operated, which crude grades are purchased and how heavy fractions are processed after distillation.
When diesel margins are exceptionally strong, refiners have a financial incentive to maximize crude throughput and direct suitable intermediate streams into hydrocrackers and other conversion units. Vacuum gas oil can be upgraded into diesel and other transport fuels, while vacuum residue may be sent to cokers, residue hydrocrackers, fuel-oil blending or dedicated bitumen production. The preferred route depends on refinery design, product specifications, available hydrogen, unit capacity and the relative value of each possible output.
Higher crude runs can initially produce more vacuum bottom because a larger volume of crude enters the distillation system. That does not mean the additional residue will reach the commercial bitumen market. A refinery with conversion capacity may process more of the heavy fraction into higher-value products. Another refinery may blend the residue into fuel oil if marine or industrial fuel values are more attractive. Only facilities equipped and commercially positioned to manufacture paving grades may allocate additional residue to bitumen.
The opportunity cost of bitumen production consequently rises when diesel and other fuels generate exceptional returns. A refinery must compare the netback from selling straight-run or processed bitumen with the value available from further conversion, fuel-oil production or alternative residue applications. If the transport-fuel route produces a stronger margin, management may maintain only the bitumen volumes required for domestic contracts or regular customers rather than maximize open-market sales.
This effect can be especially important in integrated and highly complex refineries. Such plants have greater flexibility to change the product mix and extract more transport fuels from each barrel. A simpler refinery without a coker or residue-conversion unit may continue producing larger volumes of vacuum bottom and bitumen because it has fewer alternatives. Therefore, high diesel margins can tighten bitumen supply unevenly, with the strongest effect appearing at refineries capable of processing residue more deeply.
The second-half outlook also includes the return of scheduled maintenance. The operating rates reported for the second quarter cannot be sustained indefinitely because refining units require inspections, catalyst replacement and mechanical work. Chevron expects third-quarter downtime to reduce downstream earnings by approximately $175 million to $225 million. ExxonMobil has said its scheduled maintenance will be lower in the third quarter than in the previous three months, but its management has also warned that exceptionally high refinery utilization cannot continue permanently.
Maintenance can affect bitumen more sharply than headline crude-processing figures suggest. Work on a crude unit, vacuum distillation unit, hydrogen system, hydrocracker or storage installation can change the quantity and quality of residue available for paving-grade production. A refinery may continue processing crude at another section of the site while suspending bitumen production because a specific tank, heater, blending line or loading system is unavailable. The resulting supply reduction may not be visible in national refinery-utilisation statistics.
Third-quarter maintenance is also occurring during a period of restricted inventories. United States distillate stocks remained below their recent five-year average in July, while exports were required to support customers in Europe and Latin America. Russia’s restriction on diesel exports and continued refinery damage reduced another major source of global supply. Limited Chinese product exports further reduced the number of cargoes available to balance regional shortages.
Under these conditions, refineries have little commercial reason to reduce diesel output voluntarily in order to increase bitumen availability. Road-paving material remains important, but diesel serves freight transport, agriculture, industry, construction, heating and emergency power generation. Buyers of diesel also operate in a more liquid international market, allowing refiners to redirect cargoes quickly toward regions offering the strongest return.
The bitumen market could therefore experience restricted supply even without another major increase in crude oil prices. Crude remains an important production-cost component, but it is not the only factor determining availability. Refinery margins, maintenance schedules, residue values, storage capacity, export commitments and shipping conditions can all tighten supply while the crude benchmark remains stable or even declines.
This distinction matters for buyers attempting to forecast prices. A reduction in Brent or Dubai crude does not necessarily result in an immediate decline in bitumen quotations. If diesel margins remain high, a refinery may continue demanding a strong value for vacuum bottom because the material retains an alternative value within the fuel-production system. Suppliers may also protect their margins by reducing spot offers rather than lowering prices in line with crude.
The effect may be particularly visible in Asian markets. India, China, Southeast Asia and parts of the Middle East require large volumes of transport fuel while also supporting major road programs. Refineries serving these markets must allocate crude and operating capacity between domestic fuel demand, profitable exports and bitumen commitments. When diesel inventories are tight, government or commercial pressure to maintain fuel supply can take priority over additional paving-grade sales.
India could face a concentrated risk after the monsoon period. Road construction and maintenance normally increase as weather conditions improve, creating stronger restocking demand for VG-grade material. If regional refineries continue prioritizing diesel and imported Gulf cargoes remain affected by shipping and insurance constraints, domestic buyers may enter the new paving season with fewer alternatives. The result could be stronger price differences between domestic supply, imported bulk cargoes and packaged material.
Southeast Asian buyers may also face increased competition for regional cargoes. South Korean and Singapore-based suppliers can become more important when Gulf availability is restricted, but those refineries are also exposed to strong margins for diesel, jet fuel and gasoline. Higher production rates do not guarantee that sufficient residue will be offered as bitumen, especially when storage and specialized tanker availability remain limited.
For asphalt producers, the main risk is not only a higher purchase price. Reduced loading flexibility can create delays, smaller confirmed allocations and shorter quotation-validity periods. Importers may have to divide tenders among several origins, maintain larger safety stocks or purchase earlier than usual. Contractors operating under fixed-price road agreements may then face a mismatch between rising material costs and previously agreed project budgets.
There is also a risk that high utilization increases the need for unplanned maintenance. Operating a refinery near maximum capacity for an extended period places greater demands on furnaces, compressors, pumps, catalysts and heat-exchange systems. Refineries maintain strict reliability programs, but unexpected outages can still remove product supply with little warning. In a market already short of diesel and operating with limited bitumen flexibility, a single major shutdown can have a larger regional effect than it would under normal conditions.
The latest company results therefore provide two different signals. The first is that major refiners are producing exceptionally high volumes and capturing strong margins. The second is that even this level of production has not restored comfortable fuel inventories or eliminated the expectation of high prices. If refineries cannot create a clear surplus of diesel while operating near their limits, they are unlikely to sacrifice profitable fuel output solely to increase bitumen supply.
For the bitumen market, the second half of 2026 should be assessed through refinery economics rather than crude prices alone. Diesel crack spreads, vacuum-bottom values, fuel-oil margins, planned maintenance and actual bitumen loading volumes will provide a more complete view of supply. Importers should also monitor whether refineries renew spot offers after maintenance and whether nominal production increases translate into cargoes available for export.
The central conclusion is that record refinery throughput does not equal abundant bitumen. High diesel margins can support heavy refinery runs while simultaneously reducing the commercial incentive to allocate residue to paving material. Scheduled maintenance will remove part of the capacity that operated at unusually high rates in the second quarter, and international fuel shortages will continue to reward diesel production. Bitumen supply could therefore remain restricted even if crude prices stop rising, making refinery product priorities one of the most important market indicators for the remainder of 2026.
By WPB
News, Bitumen, Diesel, Refining Margins, Vacuum Bottom, Refinery Maintenance, Asphalt, Fuel Supply, Asian Market, Refinery Economics
