Big Oil Warns Global Fuel Stocks Are Running Dangerously Low
Ukraine’s Drone Campaign Drives Russian Oil Refining to 24-Year Low What I Cover Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the… The world is running short on fuels—the warning was first issued by some analysts who were watching the physical market rather than futures charts.
Now, Big Oil is joining the chorus of warnings, with Shell, Exxon and Chevron all saying that prices at the pump are set to stay higher, regardless of where crude oil prices go.
“The constraint pain point in the energy system is refining," Exxon’s chief financial officer Neil HansentoldBloomberg in an interview last week.
This, according to him, is “something that perhaps the market isn't fully focused on.” Indeed, most oil market observers have focused exclusively on futures prices even when the gap between those and physical oil prices has been quite substantial as a result of the export flow disruption in the Middle East that has now spread from the Strait of Hormuz to the Red Sea as well.
Futures prices are currently down from last week’s peak on President Donald Trump’s latest declaration of peace talks—but physical markets are in a very different place, and that is especially true of refined products.
Bloomberg reported last week that the wars in the Middle East and Ukraine, plus China’s caps on fuel exports—and Russia’s ban on diesel exports—have effectively slashed global refining capacity by as much as 10%.
This may not sound like much at first glance, but it is a significant enough number to have some observers worried.Related: Ukraine’s Drone Campaign Drives Russian Oil Refining to 24-Year Low As early as April, Energy Aspects and Rystad Energywarnedthat global fuel inventories were getting squeezed by the Middle East war since the region, besides being a leading crude oil exporter, is also a major exporter of refined products.
Now, more analysts are sounding the alarm as the U.S.
and Israeli war against Iran enters its sixth month.
“We’re in a diesel supply crunch right now because none of the Persian Gulf refineries can get product out,” Rabobank senior energy strategist Joe DeLaura said, asquotedby the Wall Street Journal last week.
“Crude oil is just the input, but diesel is the everything the industrial economy runs on,” he also said.
“Everything in agriculture, everything in construction, everything in mining.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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