Sky-high refining margins for diesel and gasoline in Europe and the United States, driven by a cutoff in Russian supply, has sent prices for some types of physical crude oil to all-time records according to traders, said Reuters.
The dearth of fuel in the major consuming countries just as the summer driving season in the United States kicks off has lifted asking prices near and above historic peaks for lighter and medium oil types from West Africa to the North Sea.
The sharp rises underscore a tight market and the difficulty of bringing down transport fuel costs, which have thrust inflation toward 40-year highs and triggered recession fears in the United States and some parts of Europe.
Offers for medium sweet Forcados Blend and Escravos crude from Nigeria have approached an USD8 premium compared to dated Brent, traders said, their highest ever according to Refinitiv Eikon data. The grades are easily refined into middle distillates like diesel. Qua Iboe, another type of Nigerian oil that is suitable for refining into gasoline, was on offer for an unprecedented dated Brent plus USD6.
"Nigerian crude is being supported by gasoline and distillate shortages in general in Europe and the United States," a West African crude trader said. Gasoline refining margins, also known as cracks, in Northwest Europe hit a new peak last week at just above $40 a barrel last week before edging down about USD10 - still near highs last seen in 2015, with stocks there plunging a quarter or 250,000 tons on the week.
In the North Sea, Oseberg and Ekofisk differentials are at all-time highs, traders said, partly due to reduced loadings around maintenance in the latter. Seaborne non-Russian barrels, including from Norway, imported into the Polish Baltic Sea port of Gdansk, have been on the rise as refineries in eastern Europe and Germany look for alternatives to Russian oil.
In the United States, gasoline-friendly light sweet U.S. West Texas Intermediate (WTI) crude rose to its highest since March earlier this month. Average diesel prices in the U.S. hovered around a record of USD5.58 this month, up three quarters from last year, as the retail cost gallon of gasoline topped USD4.37 - also a record.
As per MRC, the price of Brent crude oil, the world benchmark, has increased in 2022, partly as a result of Russia’s full-scale invasion of Ukraine. In addition, a strong U.S. dollar means that countries that use currencies other than the U.S. dollar pay more as crude oil prices increase. Since June 1, 2021, the Brent crude oil price has increased by 59% in U.S. dollars and by 86% in euros.
As per MRC, Russian fuel oil arrivals in the UAE oil hub of Fujairah are set to jump sharply to about 2.5 MM barrels this month, data shows, in a sign that flows of Russian oil and refined products are shifting away from Europe.
We remind, oil prices fell on Monday as concerns over weak economic growth in China, the world's top oil importer, overshadowed fears supply might be crimped by a potential European Union ban on Russian crude.
mrchub.com