-- The supply crisis triggered by the Iran war has resulted in an unprecedented global energy reconfiguration, as Europe turns to North American crude to replace missing Middle Eastern supply while also exporting surplus gasoline and fuel oil to Asia, Wood Mackenzie said on Tuesday.
By early March, Middle East crude flows fell 60% to 5.9 million b/d, down from 18.7 million barrels per day in early February, after conflict erupted between the US and Israel and Iran, leading to the effective closure of the vital Strait of Hormuz.
The disruption forced Europe to import record volumes of North American crude and refined products. It simultaneously shipped excess gasoline and fuel oil to Asia.
"This is not a temporary disruption but a structural shift in global energy flows," said Javier Solis, analyst at Wood Mackenzie's Maritime Team. "Europe's diesel deficit and gasoline surplus, combined with Asia's role as the balancing valve, represent a moving landscape in which pricing and flows remain tightly linked to political decisions rather than purely commercial signals."
Imports from the US and Canada have enabled European refineries to maintain throughput, especially for gasoline and fuel oil, even as diesel tightness persists with prices hovering above 2 euros per liter due to premium US imports and compounding Hormuz-related crude disruption.
"Europe's diesel market faces a structural deficit driven by multiple factors. The redirection of 3.6 million metric tonnes of Middle East Gulf and Indian distillates eastward removed traditional westbound supply. Baltic diesel exports collapsed 76.7%, eliminating another key source," Wood Mackenzie analysts said.
European diesel premiums are expected to remain elevated through H2 2026 due to structural supply constraints, while gasoline oversupply is likely to persist with refiners in the continent facing ongoing margin pressure, they said.
Europe's exports of unleaded motor spirit jumped 79.7% week-on-week east of Suez to 591,685 MT, especially to Pakistan and South Africa. At the same time, exports of fuel oil have also accelerated with Singapore accounting for 336,260 MT of European supply, with Ain Sukhna, Houston and Rotterdam also absorbing part of the flows.
Meanwhile, Asia has emerged as the release outlet for surplus supply absorbing excess gasoline and fuel oil from Europe and record North America crude volumes. US crude flows to Asia were similar to Europe's at 1.41 million bpd over the same period, with India and East Asia accounting for most of the volume.
"East Asia emerged as the largest destination for Canadian West Coast crude exports. Asian markets retain regional distillates internally, consolidating MEG and Indian gasoil eastward rather than allowing traditional westbound flows," analysts said.