Crude oil prices and refinery margins generally increased throughout the third quarter

Petroleum markets in the third quarter of 2026 (3Q26) were characterized by increasing prices for crude oil and petroleum products amid persistent conflict in the Middle East.

Crude oil prices

Crude oil prices steadily climbed in 3Q26 as markets adjusted to renewed military strikes in the Middle East. The front-month futures price of a barrel of Brent crude oil began the quarter at $72 per barrel (b) on July 1, the lowest since February 26, two days before the start of the war. The low prices at the start of the quarter reflected increased flows through the Strait of Hormuz in June following the June 17 Memorandum of Understanding (MOU).

Following the resumption of military strikes on July 7, crude oil prices increased, with the futures price passing $100/b on July 23 and then trading between $79/b and $98/b until September 8. Daily price volatility in this period generally reflected:

• Market responses to public statements by U.S., Iranian, and other regional leaders on military plans and the likelihood of a peace deal
• Flows and disruptions to flows through the Strait of Hormuz
• Other supply risks and disruptions, such as attacks on oil export infrastructure in Russia

Crude oil futures prices passed $100/b again on September 9 following an escalation of military action against energy infrastructure in the Middle East and Russia, including:

• U.S. and Iranian attacks on crude oil tankers
• U.S. blockade on Iranian oil exports
• Attacks on pumping stations along Saudi Arabia’s East-West pipeline
• Attacks on Saudi Arabian oil tankers around the Bab el-Mandeb Strait
• Ukraine’s drone attacks on Novorossiysk, one of Russia’s major oil terminals on the Black Sea

Prices also increased because some of the measures that had helped to mitigate the price effects of reduced global supplies earlier in the year began to unwind. Since April, reduced crude oil imports to China lowered global oil demand, absorbing some of the shock of reduced supply from the Middle East. In 3Q26, China continued to import far less crude oil than it did before the war. However, China’s 3Q26 crude oil imports were up from May and June, adding some demand back into the market. Additionally, releases from the U.S. Strategic Petroleum Reserve slowed significantly in September, limiting additional sources of supply as the disruption has continued.

The futures price for Brent crude oil peaked on September 15 at $109/b while spot prices reached as high as $132/b around the same time. Like in April, disruptions of supply—particularly out of Saudi Arabia—put more pressure on Brent crude oil spot prices as buyers struggled to find short-term supply amid the escalating military action. Crude oil prices averaged around $104/b in the final two weeks of the quarter as markets balanced peace discussions with the possibility of a wider scale war.

Refinery margins

Like in the previous quarter, U.S. refineries ran at unseasonally high levels in 3Q26 with utilization averaging 95%, processing the most crude oil for the third quarter since 2019, when refining capacity was 4% higher. High refinery inputs reflected strong margins for transportation fuels. Motor gasoline, distillate, and jet fuel crack spreads—measures of the refinery margins for these fuels—were all elevated. The quarterly average gasoline crack spread more than doubled the year-ago level despite declining in the second half of the quarter, and the distillate and jet fuel crack spreads almost tripled their year-ago levels as a result of tight global supply.

Crack spreads were highest for distillate fuel oil and second highest for jet fuel because the disrupted refining activities in Russia, China, and the Middle East supplied large shares of these fuels to global markets. U.S. distillate fuel supplies have become tight because of high exports to markets in short supply, as well as higher costs for importing regions, such as the U.S. East Coast. As of the week ending September 25, U.S. distillate fuel inventories were 13% below the five-year (2021–2025) average while U.S. gasoline inventories and jet fuel inventories were 7% below and 3% above their five-year averages, respectively.

Principal contributor: Jimmy Troderman