The escalating trade war between the United States and Iran has affected Asian oil refiners’ plans to increase production in August, which could keep global fuel stocks limited and raise prices for a longer period unless China fills the gap.

Asian refiners, counting on more stable oil supplies and a recovery in global fuel production during the current quarter, were expected to lead the way, but tit-for-tat attacks between the United States and Iran have once again disrupted crude oil exports from the Gulf via the region’s main shipping lane, through which a fifth of the world’s oil supply passed before the war.

This has led Asian refineries that had booked crude oil supplies for August to prepare for delays in shipments from the Middle East, while refineries in the United States and Europe are already operating at near-maximum capacity.

At the same time, Russia is banning diesel exports because of Ukrainian drone attacks on its refineries, meaning that the global supply of petroleum products will remain limited and that gasoline, diesel and jet fuel prices will rise. High fuel prices have pushed refiners’ profit margins to record highs in the United States and Europe, and to their highest level in two months in Asia.

For diesel and jet fuel, Asian refiners’ profit margins jumped to more than $65 a barrel, up from just over $20 before the war. Globally, forecasts released by the International Energy Agency on July 10 indicate that refineries will operate at a capacity of 81.6 million barrels per day in the third quarter, an increase of more than four percent compared to the second quarter, driven by the recovery in Asia, but this level is still four percent lower than the same period of the previous year.

In Asia, economic analysts predicted that the refining rate would reach 30.37 million barrels per day in August, up from about 28 million barrels per day in May and June. A Chinese refining executive predicted some delays in shipments in July and August, which would make it difficult to increase production. Chinese refinery operating rates fell to just 58 percent of capacity in June.

China has the greatest flexibility to increase production, and it is less dependent than other countries on imported crude oil, as it has a large stockpile that it can use. Chinese refineries maintained low production levels amid weak domestic demand and restrictions on fuel exports. Beijing eased export restrictions for July, but it remains unclear whether this policy will continue in August.

Analysts suggested that US and European refiners could maximise their output in the third quarter to take advantage of record profit margins, but they do not have much room to increase production.