The oil market is splitting in two: crude prices are soft while refined product prices are surging, TotalEnergies CEO Patrick Pouyanne said at the ONS conference in Stavanger, Norway. He linked the divide to shipping costs through the Strait of Hormuz and to reduced Russian fuel supply after Ukrainian drone strikes.
Crude and products move in opposite directions
Crude shipments continue moving through the Strait of Hormuz without issues, Pouyanne said, but higher shipping costs have stopped all refined product flows through the waterway. Ukrainian drone strikes have cut fuel supplies from Russia by 3 million to 3.5 million barrels per day.
According to Investing.com: "Our consumers in Europe will suffer on this one," Pouyanne said. He added that in the US, gasoline prices would not go lower than $4, as President Trump would like.
Benchmark crude near $90 while product premiums widen
Benchmark crude oil trades near $90 per barrel in London, below levels seen at the start of the war. Meanwhile, the premium for products such as diesel over crude has reached near its highest level in over 15 years.
The shipping economics explain the split. Shipping a very large crude carrier with capacity for 2 million barrels through Hormuz costs about $20 million, Pouyanne said. For the smaller vessels that carry refined products, that additional expense is too high, so no product tankers are moving through Hormuz, he said.
Source: Investing.com
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