Global diesel fuel supply will remain tight into next year for lack of enough refining capacity to pick up the slack from Middle Eastern and Russian facilities, Reuters has reported, citing refining and commodity trading industry executives.
“There's really a shortage of products because we're missing 2 million barrels a day from Russia, and we're missing nearly 2 million barrels a day from the Middle East,” said Russell Hardy, chief executive of Vitol, speaking at the Asia-Pacific Petroleum Conference.
“When you're looking forward to a winter season coming where diesel stocks are quite deficit, you're setting up for an environment where that strength could continue in those markets,” Phillips 66’s senior vice president for global trading, Mark Senn, said.
Diesel prices in the United States have broken records recently, topping $5.90 per gallon this month. Diesel—and other fuel—prices are soaring across the world as the squeeze reaches end consumers, prompting governments to implement emergency relief measures such as fuel tax cuts.
The problem is that lost supply is not returning soon. As Vitol’s Hardy explained, fuel exports out of the Middle East are running at just 1 million barrels daily, which has prompted inventory draws with no immediate hope for replenishment.
“We keep eating into the surplus that exists around the world, and we're pretty much at the bottom of our stockpiles,” the commodity major’s CEO said, echoing remarks made by multiple industry executives and energy analysts over the past few months.
Russia has a ban in diesel exports while it repairs damage to refineries from Ukrainian drone strikes and tackles a domestic market fuel squeeze, and Middle Eastern refiners cannot get their fuels out of the Strait of Hormuz—and they are dealing with refinery damage as well. Attacks on infrastructure continue: Saudi Aramco just had its Jizan refinery attacked by the Yemeni Houthis yet again this week. The facility has a capacity of 400,000 barrels daily.
By Irina Slav for Oilprice.com
