Sanctions on Russia have distorted global energy markets and refinery runs. From Rystad Energy at oilprice.com:
- Diesel and gasoline markets are witnessing crack spreads in the $50-$60 per barrel range due to inventory stocks across the world being at record lows.
- The global oil demand recovery looks resilient as the final Covid-related restrictions are being removed around the world.
- Refining capacity in both Europe and the U.S. has fallen dramatically in the last decade, making the replacement of low inventories particularly difficult.
Global diesel and gasoline markets are witnessing blowout crack spreads in the US$50-60 per barrel (bbl) range, reflecting a clear lag in the refining system to respond effectively and decide between supplying diesel or gasoline. The precarious situation is driven by inventory stocks across the globe being at their lowest levels historically and, therefore, unable to provide the necessary shock absorbers. The loss of Russian refining owing to operational outages and product containment challenges has caused a diesel/gasoline hole greater than 1 million barrels per day (bpd) in Europe that is not easy to plug, Rystad Energy research shows.
“Diesel is the lifeblood of the global economy, essential to vital sectors such as agriculture, construction, and transportation – its price impacts almost all supply chains and goods. Governments face tough decisions. They can assist consumers by dropping taxes on diesel, but this will likely only increase demand, which may support the overall economy but will worsen the existing tight supply situation. If supply does not improve, governments will be forced to enact emergency plans to limit sales to consumers in order to ensure essential sectors are kept going,” says Per Magnus Nysveen, Head of Analysis at Rystad Energy.
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