Morning Highlights: Brent Tops $95 on 11th Night of U.S. Strikes as Saudi Tankers U-Turn Away from Red Sea; Asian Refiners Face August Supply Delays

Wednesday, July 22, 2026 | 6:45 AM ET

Brent (September) $94.39 | WTI (September) $87.35 Brent +$3.38, WTI +$3.01, both touching their highest levels since June 11 after Brent hit a session high of $95.47. The U.S. military carried out an 11th consecutive night of strikes on Iran, following Kuwaiti air defenses intercepting Iranian drones. Three tankers carrying Saudi crude for China and India made U-turns in the Red Sea Tuesday rather than risk the Yemeni coast, redirecting toward the Suez Canal as Asian refiners brace for August supply delays.

Bottom Line

The tanker U-turns are a clear sign that the Houthi threat has moved from rhetoric to commercial reality. Three vessels carrying Saudi crude bound for China and India abandoned the Bab el-Mandeb route Tuesday and redirected toward the Suez Canal, and Asian refiners are now actively working to reroute Yanbu crude around Africa rather than wait to see if the blockade materializes. It seems that the diversions themselves are pressuring the physical market independent of whether the Houthis follow through on the blockade. Shippers don't need confirmation of a closure to start rerouting, the threat alone is enough to add weeks of transit time and remove capacity from the system.

The refining side is where this shock is likely to show up most persistently, because it hits a system with almost no slack left. The IEA's July 10 forecast for 81.6 million bpd of global refining runs in the third quarter, a recovery led by Asia, was built on the assumption of steadier Gulf supply that no longer holds. Wood Mackenzie's estimate that Asian throughput would rebound to 30.37 million bpd in August is now genuinely uncertain, and Formosa Petrochemical's K.Y. Lin gave about as direct a warning as an executive is going to give in public: crude is secured for August, but delivery and arrival timing is uncertain given the resumed conflict, and any trickle of Hormuz volumes still won't compare to pre-war levels. A Chinese refining executive, speaking anonymously, said the same thing in fewer words, expecting delays on July-August cargoes that will make it hard to raise output.

China is the wildcard that could offset this, and the numbers explain why. Kpler's Sumit Ritolia notes non-China Asian refiners are already running at 93% to 95% of pre-war levels, meaning they have little room left to absorb more disruption. China's refiners, by contrast, ran at just 58% of capacity in June, held back by weak domestic demand and export restrictions rather than supply constraints, since China's large stockpile makes it less dependent on immediate imports. That gap is exactly why the fuel export quota decision for August matters so much: Beijing eased curbs for July, and whether that continues will determine how much of China's idle capacity comes online to backfill what Asian refiners elsewhere can't produce. Wood Mackenzie sees China's throughput climbing to 13.96 million bpd in August from 12.63 million in June, and independent refiners buying discounted Middle Eastern crude, including Shenghong Petrochemical's 320,000 bpd Jiangsu plant restarting in mid-August after overhaul, are expected to add to that.

U.S. and European refiners have essentially no ability to fill the gap even at record profitability. U.S. Gulf Coast crack spreads hit close to $70 a barrel late last week and European diesel margins hit a record $66.25 after Russia's diesel export ban, but both regions are already running near capacity. Industrial Info Resources' Trey Hamblet's point about gasoline is worth flagging specifically: Gulf Coast gasoline stocks are super low, but refiners are prioritizing diesel output because that's where the margin is, which locks the market into a situation where every product stays tight simultaneously rather than one relieving pressure on another. Sparta's Neil Crosby framed the mechanism plainly, there simply isn't enough global capacity to absorb a Hormuz closure and a Russian export ban at the same time, so prices have to rise until demand responds.

The API inventory data released ahead of today's EIA figures adds a small wrinkle worth noting without overreading it. Crude and distillate stocks rose last week while gasoline stocks fell, a mixed picture that's consistent with the margin dynamics above (refiners running hard on diesel, gasoline getting squeezed) rather than a signal of genuine supply relief.

Top Developments

Saudi Tankers U-Turn Away from Red Sea, Asian Refiners Reroute Toward Suez and Africa

Three tankers carrying Saudi crude bound for China and India made U-turns in the Red Sea Tuesday rather than transit near the Yemeni coast, redirecting toward the Suez Canal following Houthi threats to target vessels carrying Saudi oil. Asian refiners are now working to move Yanbu crude through the Suez Canal and around Africa instead. Analysts estimate more than 3 million bpd of Saudi crude previously routed to Asia via Bab el-Mandeb could be forced onto substantially longer routes if the threat holds, adding weeks of transit delay for cargoes already lined up for August.

11th Night of U.S. Strikes on Iran, Kuwaiti Air Defenses Intercept Drones

The U.S. military carried out an 11th consecutive night of attacks on Iran, coming shortly after Kuwait's army reported intercepting Iranian drones with its air defenses. The renewed conflict has again sharply reduced Strait of Hormuz traffic, which handled roughly a fifth of global oil supply before the war, compounding the separate threat to Saudi Red Sea exports from the Houthi blockade declaration.

Refining Recovery Stalls as Asia Faces Delays, China Holds the Spare Capacity

Non-China Asian refiners are running at 93% to 95% of pre-war levels with little room to absorb further disruption, while China's refinery runs remain at just 58% of capacity, held down by weak domestic demand and fuel export restrictions rather than supply limits. Wood Mackenzie expects Chinese throughput to rise to 13.96 million bpd in August from 12.63 million in June, with independent refiners buying discounted Middle Eastern crude, including Shenghong Petrochemical's Jiangsu plant restarting in mid-August. Whether Beijing extends its July easing of fuel export curbs into August will help determine how much of that capacity comes online. U.S. and European refiners are running near capacity despite record margins, with U.S. Gulf Coast crack spreads near $70 a barrel and European diesel margins at a record $66.25 following Russia's diesel export ban, leaving little ability to offset the Asian shortfall.