Publications: Notes at the Margin

Products Offer Little Support for Crude Prices (May 20, 2024)

 

The oil ministers who gather on June 1 in Vienna will confront a dilemma stemming from the wide differences in global oil supply and demand forecasts. Many will be positive about the near-term outlook, especially given OPEC’s projections and the bullish views of market commentators. Even so, the group will likely maintain current quotas because markets are stubbornly refusing to reflect the optimism.

 

Indeed, there is good reason for pessimism. Principal product markets, particularly the gasoline market, appear oversupplied as the northern hemisphere enters summer. Inventories in critical markets are high. Consequently, if history holds, gasoline refining margins will probably decline over the next month or two.

 

Diesel markets also look flush and that may continue as Middle Eastern exporting countries attempt to evade crude oil production restrictions by boosting product exports. Here, the Saudis’ duplicity may become obvious if they increase their imports of discounted Russian diesel while exporting domestically produced fuel and calling on other member nations to adhere to their output allotments.

 

Crude and product markets may be nearing a price tipping point.

 

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