Fuel markets show supply shortage despite subdued oil prices
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- European diesel refining margins hit a record high of over $60/barrel on Wednesday after Russia banned diesel exports amid Ukrainian attacks on its refining infrastructure.
- The US Nymex 3-2-1 crack spread hit a record $64.58/barrel on July 8, while European gasoline traded at a ~$41/barrel premium to crude — its highest since summer 2022.
- Russian diesel and gasoil exports fell to a record low of about 400,000 barrels per day before the latest attacks, dropping to less than half that level so far in July.
- Sparta Commodities analyst Neil Crosby said "there's just not enough refining capacity left globally," warning high fuel prices could soon curb consumer demand.
- Energy Aspects' Natalia Losada said Russia's ban will force buyers including Brazil, Turkey, and North and West African countries to seek replacement cargoes from the US, Middle East, and India.
- US gasoline stocks hit their lowest level for early July since 2021 in the week to July 3, while OECD oil product inventories remain below the 2015-2019 average.
- The Strait of Hormuz carried about a fifth of global oil supplies before the US-Israeli war on Iran; crude has eased since last month's ceasefire, but refined product tightness persists into peak Northern Hemisphere summer driving season.
Why it matters: European and US refiners are pocketing record margins — European diesel above $60/barrel, US crack spreads at all-time highs — as Russia's diesel ban forces buyers in Brazil, Turkey, and North and West Africa to seek replacement cargoes from the US, Middle East, and India, just as Northern Hemisphere farmers face higher fuel bills ahead of the autumn harvest.
