Brent may still be trading at just under $90 per barrel, but that figure is deceptively reassuring. Because the premium for diesel – known as the crack spread – has risen so steeply, diesel is now priced at levels normally associated with crude well above $100 per barrel.
That explains why wholesale diesel in Rotterdam closed on Monday at almost $1,238 per metric ton, its highest level since 5 May. The last time it traded at a comparable price, crude oil stood at roughly $110 per barrel.
Inventories Are Set to Fall Further
European diesel stocks are already at a multiyear low, according to Morgan Stanley. The US investment bank expects them to decline further over the coming months, reaching just 299 million barrels in November – the lowest level for that time of year since 2015.
For motorists, the implication is clear: diesel prices are likely to rise further or remain elevated for the rest of the year unless crude oil falls substantially. A sharp decline would ease some of the pressure, but there is little sign of that for now.
Conditions in the oil market are instead becoming even more difficult. The Strait of Hormuz is once again largely closed, the US has resumed its blockade of Iranian ports and Yemen’s Iran-backed Houthi rebels have threatened to block tankers using Saudi Arabian ports in the Red Sea. Riyadh increasingly relies on this route as an alternative to shipments through Hormuz.
At the same time, increasingly effective Ukrainian strikes on Russian refineries have prompted Moscow to ban diesel exports, even as it continues to sell crude abroad. The loss of Russian refined products from the global market is adding further upward pressure to fuel prices.
Together, the disruption in the Persian Gulf, the threat to Red Sea shipping and the loss of Russian exports have pushed Europe’s diesel premium to unprecedented levels.
Originally published on the author's personal website lukaskovanda.cz.
