Oil prices have been moving sideways, with a slight upward trend, for the second consecutive day. Traders are carefully considering the impact of ‘dark fleet’ transits and escalating tensions in the Middle East on the flow through the crucial Strait of Hormuz. Arne Lohmann Rasmussen, chief analyst at Global Risk Management, noted that the market is pricing in a scenario of prolonged closure due to the UAE-Iran conflict, which is supporting oil and refined products.
In addition, global inventories are decreasing, which would help absorb any supply shortages. Reports on supply and production, especially for refined products, are closely monitored as well.
The American Petroleum Institute (API) reported a decrease in crude oil stocks and Cushing stocks, while gasoline and distillates inventories saw mixed results. On the other hand, the Department of Energy (DOE) reported a significant build in crude oil stocks for the third consecutive week, with distillates drawing down for the third week.
Cushing stocks are nearing record lows, and the Strategic Petroleum Reserve (SPR) saw another decrease, pushing stocks to even lower levels. US crude production rose, approaching record highs, while crude imports eased after a surge, mainly due to reduced volumes from Canada. However, shipments from Venezuela remain strong.
Diesel prices have been rallying more than oil prices, particularly due to the conflict between Russia and Ukraine, leading to tighter energy markets. This has resulted in increased costs for drivers, truckers, farmers, and the overall industry, contributing to inflationary pressures.
The margin for producing diesel from crude oil in the US has reached all-time highs, surpassing $100 a barrel, while gasoil futures in Europe have more than doubled this year. The situation highlights the importance of refined products in the current crisis.