Integr8 Fuels: Diesel tightness puts oil and bunker prices under pressure
Steve Christy examines why Brent prices are nearing wartime highs despite weaker oil demand and recovering crude flows, as diesel and gasoil supplies tighten.
Crude oil production is increasing as more Middle Eastern volumes make their way back into the market. At the same time, oil demand is much lower than we expected. This begs the question: why are oil prices rising so rapidly, approaching the wartime highs seen in March and April?
It was only four months ago that a US-Iran peace agreement looked imminent, and we and the markets thought the war was about to end. Clearly, that did not happen! Oil prices reflect what is happening in the world, and Brent front-month futures have risen from $70/bbl back then to $90/bbl at the start of September and $115/bbl now. This is an increase that none of us can escape.
Singapore VLSFO prices have followed the same trend, rising from $675/mt in early July to $800/mt in early September and $975/mt currently. That is an increase of $300/mt, or more than 40%.
The US-Iran war led to a 13 million b/d loss in oil supply, which persisted through to May. However, production has been rising since then. Over the past couple of months, increased ship-to-ship operations in the Gulf of Oman have enabled more volumes to be exported from the region. In addition, crude flows through the Saudi East-West pipeline to the Red Sea have rebounded by 1 million b/d, following earlier Houthi attacks on the infrastructure.
This story was originally published by Manifold Times. Read the full story at Manifold Times →
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