Bloomberg's NYMEX one-month heating-oil/crude spread, tracked on the Terminal as the HOCL1 Index, breached $100 per barrel early Tuesday before surging to nearly $106 by late morning.

The historic blowout is a major warning that refinery outages in Russia (read Goldman's latest diesel warning), restrictions on industrial fuel exports, and continued disruptions through the Strait of Hormuz are deepening a crisis concentrated in finished fuels rather than in crude availability.

Larger time frame:

We first warned:

The latest snapshot of the worldwide refined-products squeeze came Tuesday morning from Kelly Chen, a senior economist at DNB Carnegie specializing in China, emerging markets, and energy markets.

Chen noted that China is one of the few countries with enough spare refining capacity to provide meaningful relief to the increasingly strained global market.

However, Chen pointed out that Beijing appears to have little economic or strategic incentive to rescue Western fuel markets.

"Some clients ask us if China can be a potential source of relief for the product markets," the senior economist wrote in the note.

She continued, "As product exports through the Strait of Hormuz remain heavily disrupted and Ukrainian attacks have constrained Russian refining, China is one of the few regions with room to materially raise refinery throughput and exports quickly."

"Beijing did increase its refined product export quotas in July, but they remain well below 2025 levels. The question is whether the authorities have an incentive to raise product exports further," she said.

Chen argued that China is unlikely to rescue global diesel markets, writing, "If US pressure forces China to reduce or halt purchases of Iranian oil, China would have to either compete more aggressively for scarce crude oil barrels or draw further on its own strategic inventories. Either option would weaken China's own energy security to ease a shortage elsewhere. China has already tapped its own buffers to absorb the disruption to crude oil and may not have appetite to do much more. Furthermore, high road-fuel prices could boost global demand for Chinese electric vehicles/energy technologies. Thus, until crude oil supplies become less disrupted, we suspect Chinese authorities have little reason to significantly raise product exports."

Professional subscribers can read the full note here at our new Marketdesk.ai portal.