European oil refining margins turn negative, bucking global trend
4/14/2026 12:00:00 PM
European refining margins turn negative despite record fuel prices, IEA and traders report
Asian refiners' competition for crude drives up costs, squeezing European margins
Simpler European refineries may cut runs if margin pressure persists, analysts and sources say
European oil refining margins have turned negative, lagging stronger margins in Asia and the U.S., as competition for crude from Asian buyers due to the Iran war drives up costs even as fuel prices hit record highs, according to IEA data and trade sources.
Northwest European light sweet hydroskimming margins dropped to an average of minus $6.45 a barrel in the week beginning April 6, the IEA said in its monthly report.
Margins for medium sour cracking were also in negative territory, the data showed. Light sweet cracking margins remain positive, though they have also weakened significantly.
The margin squeeze is a consequence of the surge in physical crude prices to record highs as the war in Iran disrupts Middle East flows.
The narrowing European margin effectively shows that these plants would be running at a loss, and is likely to prompt some to process less crude into fuels, analysts said.
Simpler European refineries, which lack upgrading units to extract more higher-value products such as jet fuel, could be forced to trim runs if margins remain under pressure, though there is no sign of widespread cuts yet, trading sources said.
"As things stand, Europe is going to cut utilization," Sparta Commodities analyst Neil Crosby said, adding that runs could fall by as much as 500,000 barrels per day.
Asian competition for crude drives up prices. By contrast, in the U.S. Gulf, heavy sour coking margins strengthened last week compared with the March average, IEA data showed. In Singapore, similarly, medium sour cracking margins were also stronger last week than their March averages.
The squeeze in Europe reflects rising crude costs as Asian refiners compete aggressively for cargoes, several trading sources said, as well as higher operating costs such as for electricity and natural gas.
"It's typical of these crises," said a trading source at a European refinery. "Fuel cracks rise first, but as crude and other costs adjust, margins get dented." He added that their margin dropped from about $30 a barrel in the first week of the conflict to just over $4 currently.
The squeeze comes after margins globally soared in March, with those in Europe reaching record highs.
In Singapore, the IEA said, margins in March were some 14-fold higher than February levels, while in northwest Europe light sweet hydroskimming margins in March were more than nine times higher than in February at $15.20 a barrel.
Some refiners even delayed planned shutdowns to take advantage of the higher fuel prices.
Italy's 300,000 barrel per day Sarroch refinery, for instance, pushed a maintenance shutdown from late March to mid-May, industry monitor IIR said. The refinery's operator, Vitol, declined to comment.
https://www.hydrocarbonprocessing.com/news/2026/04/european-oil-refining-margins-turn-negative-bucking-global-trend/