Costco (COST.US) motor oil purchase limits reflect cracks in the oil market: Is the crude oil shock passing through the refining segment and pushing oilfield services into a new investment cycle?

If Costco (COST.US) members recently wanted to buy a case of Kirkland Signature full synthetic motor oil for maintenance, they might run into an unexpected obstacle: a purchase limit notice. According to reports, this warehouse-style supermarket known for low prices and bulk packaging has raised the price of its 10-quart full synthetic motor oil from the usual $30 range to $57.99, an increase of nearly double. At the same time, each member is limited to 1 order every 7 days, with a maximum of two cases. Mobil 1 motor oil on Costco's official website is also subject to purchase limits, with the 6-bottle 1-quart specification limited to five cases per member, priced at $43.99. Costco did not respond to a request for comment. But the signal behind this move is clear enough: the shockwave from the crude oil market has already traveled from trading screens to ordinary consumers' garages. The real bottleneck is not crude oil, it is refining On the surface, this is a story about rising oil prices. Brent crude briefly surged to $109 per barrel on Monday, while WTI approached $105, both touching their highest levels since May. Saudi Arabia's key East-West pipeline was shut down due to a drone attack from the direction of Iraq. This pipeline had originally been an important alternative route for Saudi Arabia to bypass the Strait of Hormuz and transport crude oil to the Red Sea. But what is really choking off motor oil supply is a deeper structural rupture. Modern full synthetic motor oil relies heavily on Group III base oils, and more than 40% of these base oils in the United States are imported from three Persian Gulf countries Bahrain Petroleum Company, Abu Dhabi National Oil Company, and Qatar's Pearl GTL. The Middle East conflict has directly cut off the export routes for these products through the Strait of Hormuz. Worse still, Qatar's Pearl GTL suffered an airstrike earlier this year, severely damaging its production capacity, and it will be difficult to recover within at least a year. At the same time, refiners are making a rational commercial choice: using more crude oil to produce diesel and gasoline rather than base oils. The reason is simple the diesel crack spread has broken through the historic threshold of $100 per barrel. What does that number mean? The processing profit from refining one barrel of diesel is more expensive than one barrel of crude oil itself. Refiners have become the biggest winners in this crisis The diesel crack spread closed at $103.29 per barrel on September 1, setting a record high closing level, and the next day it touched $108.02 per barrel in intraday trading, before climbing further to $107.72 per barrel by September 10. Compared with the normal level before the conflict around $20 per barrel this increase is astonishing. It is reported that U.S. refineries are currently operating at full capacity with a utilization rate of 97.2%, and daily processing volume has hit a record 17.3 million barrels. But even at maximum output, diesel inventories are still approaching historic lows. U.S. distillate inventories in August are expected to hit their lowest month-end level since April 2005, and on a monthly comparison basis, possibly even the lowest since 1951. The financial reports of refiners have already reflected all of this. Valero Energy Corporation (VLO.US), Marathon Petroleum (MPC.US), and Phillips 66 (PSX.US) together earned $12.6 billion in the second quarter of 2026, the highest combined quarterly profit since 2022. In terms of share prices, Valero Energy Corporation has risen more than 130% year to date, and Marathon Petroleum more than 140%, far outpacing the roughly 40% year-to-date gains of Exxon Mobil Corporation (XOM.US) and Chevron Corporation (CVX.US). Wall Street trader Mike Khouw said: "Refiners' crack spreads have never been this wide. These companies will continue to see record profits for years to come." But he also cautioned that refiners' stock prices are also at historic highs, and eventually hopefully refining capacity will catch up with demand, and product prices will fall back. Policymakers are still catching up One of the most interesting details comes from European Central Bank President Lagarde. In her speech last Thursday, she made a rather candid remark: "If you had talked to me about refining margins six months ago, we would not have known what you were talking about. Now, whether it is called crack spreads or refining profits, all of us understand liquid fuels." Bank of England Governor Bailey earlier this week also seemed to be explaining the oil market to British politicians. Oil accounts for 40% of global energy production and 96% of transportation fuel. This kind of "last-minute cramming" itself says something. For years, the global oil market operated well under the spontaneous adjustment of production and consumption, refining margins fluctuated at relatively low levels for a long time, and no one felt there was any need to pay special attention. That was until geopolitics kicked the table over. The Chavez/Maduro regime's nationalization of Venezuelan oil/PDVSA, the destruction of the Nord Stream pipelines, the Russia-Ukraine conflict, the current Middle East war, Iran's attacks in the Strait of Hormuz, Houthi attacks in the Red Sea, and the attacks in recent days on Saudi pipelines in the region in recent years, global energy markets have continued to suffer major and destructive geopolitical shocks. Energy trader John Arnold's observation hits the nail on the head: the fundamental supply situation was already bullish, and years of underinvestment, the decline of mature oilfields, and the shrinking of spare capacity cannot be solved by monetary policy, nor by releasing strategic reserves inventories were already close to running out. U.S. diesel prices have already broken through $6 per gallon, setting a historic record, while average gasoline prices have risen to $4.32 per gallon. A year ago, those two figures were $3.70 and $3.18, respectively. The chain reaction is spreading to a broader range of consumer segments trucking costs are rising, and prices on supermarket shelves will catch up sooner or later. Oilfield services companies: the next wave? If refiners are the "present tense" of this crisis, then oilfield services companies may represent the "future tense." SLB (SLB.US) CEO Olivier Le Peuch said something on the second-quarter earnings call that carries great weight in the oilfield services industry: "The market is beginning to show the characteristics of an upcycle." An upcycle means customers are no longer only making short-term cautious expenditures, but are beginning to commit capital to multi-year projects. The evidence Le Peuch gave is that final investment decisions for long-cycle projects in 2026 are expected to increase by about 30% year over year. What is driving this shift is not simply high oil prices, but the logic of energy security the Middle East conflict has forced countries to diversify investment across more regions, and deepwater exploration and domestic production capacity are regaining favor. SLB's second-quarter revenue reached $8.97 billion, up 3% quarter over quarter. Revenue in the Middle East fell 13% due to the conflict, but growth of 12% in Latin America and gains in other regions were enough to cover the gap. The company expects fourth-quarter revenue to exceed $10 billion and forecasts significant growth in free cash flow in the second half of the year. Wolfe Research previously gave SLB an "outperform" rating in a research note, with a target price of $62, citing its positioning in the "selective capital cycle," margin improvement potential from the ChampionX integration, and growth in its digital and data center businesses. However, judging by share prices, the oilfield services sector has not yet gone as wild as refiners. SLB's stock price has risen only about 40% year to date, far short of the doubling-level performance of Valero Energy Corporation and Marathon Petroleum. If the logic for refiners is "we are making a killing now," the logic for oilfield services companies is more like "it is our turn next" provided, of course, that upstream investment really can keep up.