Crude markets remain difficult to predict, while gasoline fundamentals appear stronger than diesel and jet fuel markets, Macquarie strategists said in a Tuesday note.
The firm said headline-driven trading will likely continue dominating front-month crude prices as supply disruptions and geopolitical risks keep oil markets volatile.
Gasoline has emerged as the strongest refined product market despite already elevated crack spreads for summer and calendar 2027 contracts.
Reduced sour crude supply could lower production of catalytically cracked naphtha, also known as cat naphtha, during the summer driving season, further tightening gasoline supply, the note added.
Macquarie said lower naphtha production could tighten aromatics supplies, forcing gasoline producers to compete with chemical companies for key blending materials.
The firm noted gasoline demand has stayed strong despite higher fuel prices, though demand could weaken if US gasoline prices rise toward $5 or $6 per gallon.
Lower energy use per unit of gross domestic product and increasingly consumer-focused economies have helped support fuel demand, Macquarie added.
Diesel margins could still rise, although weaker fuel demand may help balance global diesel markets sooner than expected.
The note said global diesel demand stands near 30 million barrels per day, including about 6 million b/d tied to personal transportation.
Macquarie estimated refinery outages, lower refinery runs and Hormuz disruptions removed about 1.9 million b/d of diesel supply, supporting crack spreads and further rallies.
The firm said diesel demand fell 15% in France and 6% in Spain, raising concerns that weaker consumption could spread globally and rebalance diesel markets before Hormuz reopens, pressuring crack spreads.
A 10% decline in European diesel demand would reduce consumption by about 650,000 b/d, while the rest of the world would need to cut another 1.3 million b/d to fully rebalance markets.
Weaker fuel demand from Asian road transport, construction equipment and petrochemicals may have already reduced part of that surplus, while middle distillate feedstock demand of 1 million b/d to 2 million b/d has also likely declined, the note added.
Jet fuel markets are moving closer to balance despite limited demand destruction, with global demand at about 8 million b/d, compared with 28 million b/d for gasoline and 30 million b/d for diesel, the firm said.
Crude supply disruptions could quickly tighten jet fuel availability because refiners produce most jet fuel early in the refining process, while airport and storage inventories remain limited.
Refineries need only small production adjustments to rebalance jet fuel markets, even with refining runs reduced to 80 million b/d from the pre-war 85 million b/d level, the note said.
Typical jet fuel yields stand near 10% but could rise to 12% or briefly 14%, with a shift to 12% on 80 million b/d boosting output to 9.6 million b/d, the firm added.
Jet fuel demand has declined by only about 250,000 b/d despite supply issues, suggesting the market has moved closer to balance without significant demand destruction, the firm said.