Refined Fuels, Not Crude Oil, Are Driving Current Market Tightness
Oil prices have recently declined from a two-month high amid easing tensions between the U.S. and Iran. However, refining margins for gasoline, diesel, and jet fuel remain at record levels due to tighter supply of refined products compared to crude oil. This is driven by ongoing conflicts in Ukraine and the Middle East, as well as export bans like Russia’s recent diesel export restriction. Refining margins have surged despite rising crude prices because global fuel inventories are near multi-year lows, and refinery throughput has been constrained. In Europe, diesel refining margins hit over $60 per barrel after Russia banned diesel exports to address domestic shortages caused by Ukrainian drone attacks on refineries. Gasoline in Europe also traded at a four-year high premium of $41 per barrel against Brent crude. In the U.S., the NYMEX 3-2-1 crack spread reached record highs, indicating strong refining profitability and product demand despite higher crude prices. Despite robust capacity utilization and increased exports from the U.S., global fuel markets remain tight due to low inventories and supply disruptions in key regions.
Topics: crude oil prices geopolitical tensions global supply chain refined fuels