US fuel prices rise faster than crude as exports squeeze market

Semi-trucks drive past a giant US flag displayed at Marathon Petroleum’s Los Angeles refinery in Carson, California, USA, March 11, 2022. Picture taken with long exposure. REUTERS/Bing Guan

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NEW YORK, May 6 (Reuters) – U.S. fuel prices have risen faster than crude prices in the past month as the United States has shipped more refined products abroad to supply European markets following the Russian invasion. from Ukraine.

Traders say global fuel stockpiles are not likely to rise quickly as big producers such as OPEC are slowly ramping up output. The tightness in fuel markets is more alarming, they say, because it shows that refiners are struggling to meet demand even as more crude is available through large reserve releases.

“Things are really sticky with diesel and global demand,” Aaron Milford, chief executive of Magellan Midstream Partners, said on an earnings call Thursday.

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Global stockpiles of crude oil, gasoline and other fuels are dwindling as demand has recovered to pre-pandemic levels. Supplies were further reduced following the invasion of Ukraine and subsequent sanctions on Russia by the United States and its allies.

Washington has released millions of barrels of US strategic reserves, helping to control the price of crude oil. But product inventories continue to fall.

Since the invasion of Ukraine on February 24, US crude futures are up almost 17%, Refinitiv Eikon data shows, while US gasoline futures are up more than 30% and US heating oil futures, a gauge of diesel, have gained 40%.

“In general, at this time of year, products exceed crude, but in this case the difference is much greater than normal. It is a sign that the products market is shouting to the refiners: ‘get on with it, we need more supply,'” Phil Flynn said. , senior analyst at Price Futures Group.

Inventories are particularly tight for distillates at 105 million barrels, the lowest level since April 2008, according to the US Energy Information Administration. US commercial crude stocks have risen since late February due to releases from US reserves

U.S. refined product exports averaged 6.3 million barrels per day (bpd) over the past four weeks, nearly the fastest export rate in U.S. history.

US crude price gains have been capped by concerns about energy demand during China’s prolonged COVID-19 lockdowns.

US crude’s discount to global benchmark Brent narrowed to minus $2.15 a barrel last week, the lowest since November, before widening again. A tighter discount makes US crude less attractive in foreign markets.

Traders say lower refining capacity, particularly on the East Coast, has tightened product markets, driving up premiums for jet fuel and diesel. East Coast distillate inventories are at an all-time low.

“We really don’t have the capacity to (export more) and at the same time not affect the domestic market,” said Robert Yawger, executive director of energy futures at Mizuho. “We have increased some of the refinery utilization, but much of that increase is going to the eurozone and not to New Jersey.”

Since the Russian invasion of Ukraine in late February, US heating and gasoline futures gains have outpaced US crude futures gains as demand for exports boosts prices. fuel prices.
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Information from Stephanie Kelly; additional reporting by Arathy Somasekhar; Edited by David Gregory

Our standards: the Thomson Reuters Trust Principles.

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