Refiners Could Wait Weeks for Oil, Even After Strait Is Fully Reopened, Macquarie Says

Summary

• Physical oil market is already tight and will tighten further unless the Strait of Hormuz reopens with a U.S. declaration ending the war.
• Even if the strait reopens immediately, oil transit time of 4-6 weeks means refiners could wait weeks for crude supply to normalize.
• Refining margins are at record highs but may still be undervalued ("cheap"), with potential for further increase due to supply challenges.
• Shortages in refined products like jet fuel are imminent; last cargoes to Europe arrive in days, and to Asia in 7-10 days, after which stocks will be drawn down.
• Stock cushions (onshore and offshore) can handle about a month of drawdowns, but mitigation measures are insufficient.
• OPEC has a couple of hundred million barrels available outside the Middle East, already being used, but it's not enough.
• To rebalance the oil market, 4-5 million barrels per day of run cuts in refining are needed, but this could worsen shortages in fuels like jet fuel.
• Production shut-ins (around 12 million barrels per day) can rebound quickly within a couple of weeks if the strait reopens, assuming no damage.
• Refining damage is significant: ~3 million barrels per day globally from storage management (mostly Asia) and 3-4 million from Middle East damage, requiring longer recovery times.
• The primary market challenge shifts from crude supply to refining operations and margins, with upward pressure on oil prices.