Refining margins for gasoline and diesel jumped this week to new record highs after the re-escalation in the Middle East, Russia’s ban on diesel exports, and crumbling global fuel inventories.
The surge in fuel margins and the price spread over crude prices suggest that the global fuel markets remain very tight despite the millions of barrels of crude that have managed to exit the Strait of Hormuz in recent weeks.
Diesel refining margins in Europe jumped to a record high of over $60 per barrel on Wednesday after Russia announced a ban on diesel exports in a bid to ease its domestic fuel crisis caused by a spate of Ukrainian drone attacks on Russian refineries.
In addition, gasoline in Europe traded at a four-year high premium to crude of $41 per barrel, according to data compiled by Reuters. The last time European gasoline traded at such a high premium over Brent Crude was in the summer of 2022, in the early months of the Russian invasion of Ukraine.
In the United States, the prompt NYMEX 3-2-1 crack spread contract, which is considered a proxy for refinery profitability, hit a record high of $64.58 per barrel on July 8, according to the data compiled by Reuters.
Tighter availability amid export bans and refiners scrambling to cope with the new Middle Eastern barrels is boosting refining margins. The multi-year low fuel inventories in many countries, including the United States, also push higher refining margins and fuel spreads over crude.
“European cracks have jumped past $60 as Brazil, Africa and Turkey scramble for replacement barrels from India, the Middle East and the US Gulf. US diesel stocks are already near 5-year lows,” Sparta Commodities said.
“The supply relief traders are counting on may not arrive. Russian barrels are gone, China’s export floodgates are uncertain, and Middle East re-escalation adds fresh risk,” Sparta’s analysts noted.
By Tsvetana Paraskova for Oilprice.com
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