Refinery Attacks Deepen Global Diesel Supply Crunch
Putin Opens New Front in Shadow Fleet Fight With Threat to Seize EU Ships 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… Diesel prices surged earlier this week on news about yet another Ukrainian attack on a Russian refinery and a Houthi attack on a Saudi refining facility.
Global fuel supply is already out of balance, and the continued refinery disruption will only aggravate the situation, right before peak demand season.
ReutersreportedMonday that refining margins in Europe had surged by 10%, and that surge was from an already elevated starting point as refiners around the world see their margins rise to all-time highs on the supply tightening caused by the war in the Middle East and the Ukrainian drone attacks on Russia’s refinery network.
In the United States, the report said, diesel futures booked their sharpest rise since July on Monday, adding 7.4% to $4.19 per gallon.
The average retail price for a gallon of diesel was $5.32 on Tuesday, according toAAA data.
That was up from $4.88 per gallon a month ago and $3.71 per gallon a year ago.
Diesel is often referred to as the workhorse of any economy.
Indeed, economies run on diesel, which is used for everything from freight transportation to farming, to heating during the winter.
If diesel prices are consistently higher for an extended period of time, they will inevitably be passed on to consumers, fueling a more generalized inflation trend.Related: EIA Sees Massive Uptick in US Crude Oil Inventories “Refining margins remain elevated because every additional barrel of product has become significantly more valuable than every additional barrel of crude,” Kpler lead analyst for refining supply and modeling, Sumit Ritolia, told the Wall Street Journal this week.
Indeed, refining margins are breaking records this year, with the WSJ noting that the 3-2-1 crack spread used as a sort of refining margin benchmark had gone up to over $70 per barrel—from a usual level of less than $20 per barrel.
What’s more, refineries are operating at higher than usual utilization rates to make up for lost supply from the Middle East and Russia, but there are limits to how much they can ramp up production.
“Refinery utilization above 90-95% simply means there is very little operational flexibility left,” Kpler’s Ritolia told the Wall Street Journal.
| 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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