The IEA highlighted the critically tight situation of global fuel stockpiles, while the EU signaled that its members may not be able to agree on a Russian oil boycott just yet.
After bouncing for the majority of Thursday’s session, West Texas Intermediate settled near $106. Nations in the European Union believe it may be time to postpone an effort to restrict Russian oil if the group cannot persuade Hungary to support the ban. Russian supplies are vital to sustaining global fuel balances, according to research by the International Energy Agency. In its monthly Oil Market Report, it stated that there is now a “virtually ubiquitous product scarcity.”
“In crude, the story of the product is starting to wag the dog,” Rebecca Babin, a senior energy trader at CIBC Private Wealth Management, said. “It can’t be overlooked.”
As a result of Russia’s invasion of Ukraine, oil prices have risen by more than 40% this year, upsetting an already tight supply-demand balance. The battle is rerouting global crude flows, with the United States and the United Kingdom attempting to prohibit Russian barrel imports, while some Asian customers take up extra shipments. As the war grinds on, the European Union is under increasing pressure to reduce its imports.
According to the Energy Information Administration, US distillate stockpiles, which include diesel, fell to their lowest level since 2005 last week, while gasoline supplies fell for the sixth week. According to the IEA, diesel stocks in the OECD are at their lowest level since 2008.
- WTI for June delivery rose 42 cents to settle at $106.13 a barrel in New York.
- Brent for July settlement was little changed falling 6 cents to settle at $107.45 a barrel.
In a report to customers, analysts at wholesale gasoline distributor TACenergy stated, “Diesel drama is once again dominating the price action.” “Logistical issues as the world attempts to deal with the supply chain going from bad to worse over the past three months just in time to hit our peak demand season,” according to the report.
Bank of America warned this week that oil product cracks — the profits from processing crude into fuels — will continue to rise in the near term as refiners struggle to meet summer travel demand as concerns about limited fuel stocks grow. It observes US gasoline exports.