ADI is pleased to announce the release of its 2026 global refining & fuels outlook, which forecasts a global industry navigating tight supply and significant regional divergence. ADI Analytics views 2026 as a “year of two halves”: the first half is expected to benefit from product scarcity and commissioning lags, while the second half will likely see margins normalize as new mega-projects finally integrate into the global market.
1. Demand growth outpaces supply
Global oil demand is set to rise by ~1.0 mb/d, with refined products growing 0.5–0.8 mb/d. Diesel and jet fuel remain the strongest drivers, keeping middle distillates tight through the first half of the year. Asia and the Middle East lead incremental demand, while OECD markets stay broadly flat.
2. Capacity additions lag behind needs
Net refining capacity additions are expected between 0.5–1.0 mb/d. While gross additions are front-loaded in early 2026, effective utilization will lag due to commissioning delays. India’s Panipat and Barauni expansions, Indonesia’s Balikpapan upgrade, and Middle East mega-projects dominate the growth narrative.
3. Crude surplus meets product tightness
A crude oversupply of over 2 mb/d contrasts sharply with refined product scarcity, creating a favorable margin environment. Lower feedstock costs combined with strong product cracks will support refiners for a part of 2026.
4. Margins stay elevated, but normalize later
Refining crack spreads are forecast to average US$8–12/bbl with diesel cracks leading the pack with seasonal and regional variations.
5. Regional divergence deepens
The East continues to expand while the West rationalizes. U.S. West Coast closures and European shutdowns will tighten local balances. Meanwhile, Asia and MENA add barrels, lengthening trade routes and sustaining Atlantic Basin premiums.
Exhibit 1. Regional summary of refining and fuels markets and trends in 2026.
6. Capital spending diverges on maintenance and growth
Western refiners maintain discipline and prioritize sustaining operations and turnarounds. In contrast, Asia and Latin America pursue aggressive growth across a range of capital projects.
7. Policy and regulation reshape flows
The EU’s sanctions on Russian-origin products will redirect imports, tightening European diesel markets. U.S. biofuel mandates surge, while Asia accelerates green policies forcing refiners to adapt slates and blending strategies.
8. Geopolitical risks keep markets volatile
Sanctions, Red Sea disruptions, and potential Russia-Ukraine developments remain wildcards. These factors will influence freight rates, crude differentials, and product cracks, particularly for diesel and jet fuel into Europe.
9. M&A focuses on portfolio optimization
Expect selective consolidation rather than blockbuster deals. Western majors streamline downstream footprints, while Latin America sees strategic moves. Overall, ownership shifts favor integrated, complex assets.
10. Energy transition drives strategic shifts
Biofuels and petrochemical integration dominate growth plans. SAF mandates push refiners toward conversions, including sacrificing renewable diesel yields, while petrochemical integration becomes critical for survival—especially in Europe and China, where fuel demand growth slows.
Ultimately, success in 2026 will be defined by execution quality, as the market remains tight enough to reward those who run both hard and smart through the cycle. To capture these opportunities, refiners must prioritize reliability and optimize product slates toward distillate cracks while advancing strategic conversions like SAF. We invite you to join us at the ADI Forum on January 28 in Houston where we will discuss these findings in greater depth with a panel of executive perspectives.
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About ADI Analytics
ADI is a prestigious, boutique consulting firm specializing in oil and gas, energy, and chemicals since 2009. We bring deep expertise in a broad range of markets where we support Fortune 500, mid-sized and early-stage companies, and investors with consulting services, research reports, and data and analytics, with the goal of delivering actionable outcomes to help our clients achieve tangible results.
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