Prices for refined fuels in Asia fell sharply in line with similar declines for crude oil in the wake of the tentative ceasefire between the United States and Iran, but remain at levels that point to a supply crunch.
Prices for gasoil, jet fuel and gasoline in the Asian trading hub of Singapore all saw double-digit drops on Wednesday, amid market relief that the deal may lead to a re-opening of the Strait of Hormuz.
However, the ceasefire and commitment to peace talks made in separate announcements by the United States and Iran already looks to be on the ropes.
Tehran suggested it would be "unreasonable" to proceed with talks to forge a permanent deal with the United States as long as Israel continues to attack the Iran-aligned Hezbollah terror group in Lebanon.
There were reports of some vessels going through the Strait of Hormuz in the wake of the deal, but it remains to be seen whether more ship owners will risk transiting the narrow waterway through which as much as 20 per cent of global crude oil, refined products and liquefied natural gas moved prior to the US and Israeli attack on Iran on February 28.
Even if tanker movements do pick up, the market for physical refined products in Asia still looks stressed and will likely remain so for an extended period.
Global benchmark Brent crude futures ended at $94.75 a barrel on Wednesday, down 13.3 per cent from the previous close.
Brent ended at $72.48 on February 27, meaning it has gained 30.7 per cent from the start of the Iran conflict. While the increase in Brent looks strong, it pales in comparison to the surge in prices for refined products in Asia.
The hardest hit part of the barrel has been jet fuel, given it is more challenging to store. Singapore jet fuel ended at $193.53 a barrel on Wednesday, down 14.2 per cent from its previous close and 20 per cent below the record high of $242.06 reached on March 30.
However, it is still more than double the $93.45 it closed at on February 27, the day before the US and Israel launched their aerial campaign against Iran.
Gasoil, the building block for diesel, ended at $145.02 a barrel on Wednesday, dropping 17.1 per cent from the previous close, but it is still 59 per cent higher than the close on February 27.
Gasoline finished at $120.80 a barrel on Wednesday, down 13 per cent from the previous close. The light vehicle fuel is up 52 per cent from the close on February 27.
The premiums being commanded by refined fuels over crude futures reflect that many Asian refiners are struggling to secure sufficient oil in order to maintain operating rates.
Seaborne crude imports into Asia are estimated at 19.22 million barrels per day (bpd) for April, according to data compiled by commodity analysts Kpler. This is down from the three-month moving average of 25 million bpd for the first quarter of 2026.
It's also worth noting that April saw the last of the arrivals of vessels that exited the Strait of Hormuz prior to its effective closure after the conflict started.
This means that seaborne arrivals into the top-importing region are likely to be lower in May, even if more tankers start to move through the strait.
The drop in crude arrivals is already showing up in shipments of refined products, with Kpler data estimating April exports from Asian refiners at 6.61 million bpd, down from the 7.32 million bpd in March.
April and March were the two softest months for refined fuel exports in Asia since April 2017, according to Kpler data, and are well down from the 11.1 million bpd recorded in February.
It's the loss of around five million bpd of refined product exports in Asia that is keeping fuel prices elevated, and even if crude does start to flow out of the Middle East at pre-conflict levels, the supply chain will take months to catch up.
The risk is that the situation worsens in the near term, especially if the ceasefire fails and the Strait of Hormuz remains off-limits to most vessels.
(Writing by Clyde Russell, Editing by Kim Coghill)