Azernews.Az

Global fuel markets continue to face supply shortages despite relatively moderate crude oil prices, suggesting that the energy shock triggered by the conflict involving the United States, Israel and Iran has yet to fully subside, AzerNEWS reports.

Although crude prices retreated following a temporary ceasefire, renewed hostilities have pushed oil prices higher again. At the same time, gasoline and diesel prices have remained elevated, reflecting persistent tightness in refined fuel markets rather than a shortage of crude oil.

Before the conflict, the Strait of Hormuz carried around one-fifth of global oil supplies. Disruptions to shipping through the strategic waterway fueled concerns over energy security and contributed to higher prices.

Analysts say that even if shipping through the Strait of Hormuz returns to normal, elevated fuel prices could continue to fuel inflationary pressures for both businesses and consumers, remaining a key concern for central banks.

The situation intensified further this week after Russia suspended diesel exports, citing damage to refining infrastructure caused by Ukrainian attacks and the need to protect domestic fuel supplies.

The gap between refined fuel prices and crude oil prices—a key indicator of refinery profitability—has widened sharply as refineries in Europe and the United States struggle to process additional crude entering global markets from strategic reserves and Middle Eastern producers.

According to Neil Crosby, an analyst at Sparta Commodities, existing global refining capacity is insufficient to process all available crude oil supplies, while persistently high fuel prices could eventually weaken consumer demand.

Following Russia's export restrictions, European diesel refining margins climbed above $60 per barrel on Wednesday, while gasoline traded at a premium of around $41 per barrel over crude oil—the highest level since the summer of 2022.

In the United States, the NYMEX 3-2-1 crack spread, a widely used measure of refinery profitability, reached a record $64.58 per barrel on July 8, underscoring continued tightness in fuel markets even as crude oil prices softened.

According to data from Kpler, Russia's diesel and gasoil exports had already been declining before the latest Ukrainian strikes. Daily exports reportedly fell to around 400,000 barrels, with shipments dropping even further in July.

Natalya Losada, an analyst at Energy Aspects, said Russia's export restrictions are likely to force major importers to source diesel from the United States, the Middle East and India, intensifying competition for available supplies.

The shortage is expected to raise fuel costs for farmers ahead of the Northern Hemisphere's autumn harvest season, increasing production expenses across the agricultural sector.

Meanwhile, fuel inventories remain relatively tight. According to the U.S. Energy Information Administration, U.S. gasoline stocks fell to their lowest level since early July 2021 during the week ending July 3.

In Asia, low inventories have continued to support fuel prices despite expectations of increased exports from China.

Although petroleum product inventories across OECD countries have recovered from last year's lows, they remain below the average recorded between 2015 and 2019, indicating that global fuel markets remain vulnerable to further supply disruptions.