The diesel crisis is not over yet

Despite growing fears of a global economic slowdown, diesel supply remains a concern, and the situation could become even worse than it is now.

John Kemp from Reuters Wrote In his latest oil buying column, hedge funds and other institutional traders bought diesel contracts at the fastest price since November 2020 last week, adding the equivalent of 9 million barrels to their holdings.

Meanwhile, Bloomberg mentioned This particular US diesel demand has reached a five-year high, and may rise further as winter approaches. US diesel exports receipt It reached an all-time high last month, with South America and Europe acquiring most of these exports.

At the same time, India has imposed Restrictions on diesel exports to ensure there is enough for the domestic market. Moreover, European buyers are avoiding Russian diesel due to the sanctions, although the fuel embargo on Russia only took effect at the end of the year.

Diesel shortage is not exactly a new problem, but it is now getting a lot of attention.

Shortly after the European Union began imposing sanctions on Russia, a senior executive from the European Union of Petroleum Refineries said in March.

Russia is the largest diesel supplier in the European Union, sending about 750,000 barrels per day there to support its heavy industry, freight transport, and a host of other industries that support the bloc’s economy.

But in addition to the sanctions, the diesel market appears to have experienced the same experience as the crude oil market: a much faster recovery in demand than supply growth.

This demand growth has slowed recently with Kemp Reports Last month, expectations of a global slowdown amid rising central bank interest rates and inflation began to dampen strong diesel demand and drive down prices, but this appears to have been temporary and demand for industrial transportation fuels is on the rise again.

In another column, however, a Reuters market analyst pointed US crude oil stocks have not recovered despite fuel price inflation, which means the tightening in fuel markets – and price hikes – is likely to continue into the coming year.

Just this week, the Department of Energy reported that US oil stocks in its Strategic Petroleum Reserve He fell to its lowest level since 1985 to 469.9 million barrels.

Meanwhile, in some African countries, diesel shortage for drivers is a reality and leads to various problems. In the Central African Republic, humanitarian organizations have drop due to lack of diesel. In Cameroon, drivers have taken Take to the streets to protest the shortage.

It is not only Africa. In Brazil, the state oil company Petrobras warned The government said last week that a diesel shortage could loom in the country unless Petrobras was allowed to sell the fuel at market prices.

In Europe, fuel buyers are scrambling to secure fuel supplies before a ban on Russian barrels takes effect, which will happen in December, with many acknowledging that it will be difficult to get in next year.

Meanwhile, the US needs to balance domestic diesel demand with international demand, which could prove challenging, with stocks of diesel and other distillates low for most of this year, as production has failed to increase significantly.

Diesel demand in the United States increases seasonally in the fall as harvest begins in the Midwest, which means there may be less fuel to export. This would worsen the supply situation in other parts of the world and lead to higher prices even as expectations of an economic slowdown persist.

By Charles Kennedy for Oilprice.com

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