The global oil market has diverged fundamentally, with a bearish outlook for crude but bullish prices for products, according to the CEOs of Europe's largest energy companies.
Crude cargoes are able to transit the Strait of Hormuz “very quietly” today, but the higher cost of shipping means that no refined products are making the journey, said TotalEnergies SE Chief Executive Officer Patrick Pouyanne. At the same time, Ukrainian drone attacks have significantly curbed fuel supplies from Russia, he said.
“You have a bearish crude oil market and a very bullish product markets, which is very strange,” Pouyanne said at the ONS conference in Stavanger, Norway on Monday. “Our consumers in Europe will suffer on this one” and in the US “gasoline prices would not go lower than $4 as President Trump would like.”
Shell Plc CEO Wael Sawan said the market for oil products was being squeezed by the “triple threat” of Russian refinery attacks and the dangers to shipping in the Persian Gulf and Red Sea. The company is working to get as much refined oil products as possible out of its own assets, he said.
“We have a tough few months ahead of us and the focus needs to be on continuing to do what we can to be able to alleviate that pain for customers,” Sawan said at the same event.
Their comments reflect growing concern about how the conflict in the Middle East is affecting specific corners of the global market, with significant consequences for the wider economy.
Benchmark crude is trading near $90 a barrel in London, well below prices seen in the early stages of the war. However, the premium at which products such as diesel trade relative to crude is close to the highest level in more than 15 years.
It costs about $20 million to get a very large crude carrier capable of carrying 2 million barrels to make the journey through Hormuz, Pouyanne said. For smaller ships that carry refined products, the extra cost is too high “so you don't have a single tanker of products moving out of Hormuz,” he said.
Ukraine's drone attacks on Russian refineries have curbed the country's fuel supplies by 3 million to 3.5 million barrels a day, Pouyanne said.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
