US refining oil at max pace, but still not enough
Live Events Bloomberg as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our
Live Events Bloomberg as a Reliable and Trusted News Source Addas a Reliable and Trusted News Source Add Now! (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel US refiners are turning crude oil into products like gasoline and diesel at a pace not seen since before the Covid-19 pandemic, but even that is unlikely to rein in soaring prices soon amid a historic fuel crunch.Refineries last week processed 17 million barrels of crude oil a day, according to the Energy Information Administration, in a full-throttle effort to meet global and domestic fuel demand. That’s the highest weekly average since September 2019.In the Midwest, refineries processed the most crude on record in a week.Global fuel supplies are perilously tight, incentivizing refiners to go all-out to capture exceptionally strong profit margins, said Matt Smith, director of commodity research at Kpler.
Fuel markets have been left with little cushion after outages stemming from wars in Ukraine and Iran.“Super-sized refining margins continue to encourage refiners to run as hard as possible, resulting in a solid draw to crude inventories,” Smith said.Despite the surging processing rates, US consumers aren’t likely to see much relief at the pump soon. US fuel markets still look tight, with gasoline and diesel futures rising. That means further headaches for US drivers staring down $4-a-gallon gasoline and another wrinkle for central bankers desperate to tamp down inflation.But the impacts of the push are visible in US commercial crude stockpiles, which dipped to their lowest since 2018, falling by more than 7 million barrels, the EIA data indicated. It’s another sign that oil-market buffers are thinning as tensions in the Iran war simmer.Stockpiles at Cushing, Oklahoma, — the US’s commercial crude storage hub — are sitting below 20 million barrels, a level widely considered the operational minimum.
And the premium for buying a barrel of crude oil for delivery in September versus October rose further on Wednesday, indicating market concerns about the availability of immediate supply.To be sure, global crude oil markets have proven remarkably resilient this year, but the picture for fuels is far more fragile.Russia, reeling from Ukrainian drone strikes on its refineries, has banned exports of gasoline through year-end, and is eyeing another month of an existing diesel ban. And in the Middle East, refiners are grappling with an unclear shipping picture in the Strait of Hormuz. Profit margins for diesel in the US sit near record highs.Meanwhile, countries from Europe to South America are scrambling for fuel supplies, sending US exports surging. That’s slowing American inventory rebuilding despite near-record refinery runs. Gasoline exports remain around seasonal averages and exports of distillate fuels like diesel rose near the highest level on record.Gasoline inventories in the US remained effectively unchanged last week — their lowest seasonally since 2012.
The BriefWire