Europe Faces Risk of Potential Diesel Shortage
March 25, 2022
Oil exports via the Caspian Pipeline Consortium pipeline will partially resume oil loadings from its Black Sea terminal on Thursday after successful inspection of single port mooring.
Prices are off this morning as another release of oil barrels from the global reserve is being considered. US Energy Secretary, Jennifer, Granholm, said the United States and its allies are discussing a possible further coordinated release of oil from storage to help calm oil markets in the wake of Russia’s invasion of Ukraine.
Prices have also rallied strongly over the last 7 trading sessions, and we are seeing some profits being taken. Trading exchanges continue to raise the margin requirements as prices move higher and higher. This means that more money is needed to fund the positions that traders have in place.
US President, Joe Biden said he thinks Russia should be removed from the Group of Twenty major economies and the topic was raised during his meetings with world leaders in Brussels on Thursday.
Worsening diesel shortages in the United States and the rest of the world are increasing upward pressure on petroleum prices and threaten to recreate the conditions that led to the record price spike in 2008. The EIA reported that US distillate stocks have declined in 52 of the last 79 weeks by a total of 67 million barrels and are at the lowest for the time of year since 2014. US distillate inventories are 20% below the pre-pandemic five-year average for 2015-2019 compared with deficits of 11% in crude oil and 1% in gasoline. If stocks move in line with seasonal patterns over the last ten years, inventories are expected to fall to a low of 104 million barrels before the middle of the year, which would make them as tight as they were in 2008.
European economies face the risk of a shortage of diesel, as sanctions on Russian energy threaten to disrupt imports while supply from elsewhere remains limited. The surge in diesel prices in Europe has already had an impact on the industry by pushing up fuel and transportation expenses, which are passed on to consumers through higher costs across the economy.
There are also reports from Turkey that Russia and Ukraine are progressing on talks to end the conflict which is adding selling pressure. I hope this is correct, but we have heard this before with no results.