Refining Pressures, Supply Shifts, and Seasonal Demand: How July’s Oil Markets Tested Storage Strategies
July 2025 unfolded against a backdrop of modest crude price recovery, supply-side adjustments from OPEC+, and refining disruptions that rippled across product markets. While backwardation continued to dominate the forward curve, the month underscored the fragility of margins and the growing influence of regional supply shocks on global trade patterns. For tank terminal operators, these shifts offer both challenges and opportunities—if they act strategically.
1. Crude Prices: Recovery Without Conviction
Brent crude hovered around $68–$70/bbl in early July, supported by easing Middle East tensions, but gains were capped by uncertainty over OPEC+’s planned +411kbpd output increase and concerns about demand softness in China and the US. While the prompt curve remained in backwardation, spreads narrowed from early-month highs, signalling that the market is bracing for possible oversupply later in the year.
Strategic takeaway: Tank terminals should expect short-term trading to stay active due to tight supply, but also get ready for potential demand in longer-term storage if price spreads ease later this year.
2. Refining Disruptions Amplify Middle Distillate Tightness
The insolvency of the UK’s Lindsey Oil Refinery emerged as a significant disruptor. Producing 30–35kt of diesel per week, its troubles sparked fears of higher import needs in Northwest Europe, tightening ICE Gasoil spreads (C1–C2 at $30/ton). This development, combined with seasonal jet fuel demand, pushed gasoil and jet cracks to the highest levels in over a year.
Strategic takeaway: Refinery outages can trigger rapid shifts in product flows and tank utilisation. Terminals should maintain operational flexibility to accommodate sudden demand for middle distillate storage and handling.
3. Storage Economics: Still Negative but Watching for a Turn
Break-even storage rates for July remained well below zero for all major products, meaning storage plays continue to be unprofitable:
- RBOB M1-M6: ~-€9.12/cbm/month
- LS Gasoil M1-M6: ~-€11.19/cbm/month
- Jet Kerosene M1-M6: ~-€6.45/cbm/month
The persistence of unprofitable contango trades reinforces the shift toward throughput-focused business models.
Strategic takeaway: Commercial strategies should emphasise short-term, high-turnover contracts and value-added services until the forward curve moves decisively into contango.
4. Product Market Divergence: Gasoline Softness vs. Middle Distillate Strength
From an ARA market viewpoint, July showed diverging product dynamics. Gasoline stocks rose sharply in the US (+4mb) while ARA stocks fell to their lowest since Feb 2024. Weak US demand (8.6mbpd, below seasonal norms) contrasted with steady Rhine exports and imports from multiple European sources.
Meanwhile, gasoil prices climbed on the Lindsey refinery news, with tighter Atlantic basin markets prompting stocking activity in Fujairah.
Strategic takeaway: Diverging regional dynamics require agile tank allocation and the ability to pivot between import, export, and blending operations at short notice.
Conclusion: Navigating the Second-Half Outlook
July 2025 confirmed that operational agility and commercial flexibility are paramount for tank terminal operators. Refining disruptions, regional demand mismatches, and evolving OPEC+ policies will likely sustain volatility. Those who can quickly repurpose capacity, offer multi-product handling, and anticipate shifts in forward curves will be best positioned to capitalise on opportunities as market conditions evolve.
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