Signs of strong fuel demand in the US will support oil prices |

US gasoline and diesel inventories are declining and remain below the five-year average for this time of year, indicating resilient fuel demand and support for crude oil prices and US refining margins.

Although global Refining margins have halved Since February, with Russian oil supplies still rising despite the embargo, US refiners are optimistic about the cracks continuing, and most see no signs of falling fuel demand.

As we approach driving season and the annual peak in gasoline demand, tight gasoline and diesel markets are bullish factors for oil prices. However, the oil market is ignoring these fundamentals as investors and speculators focus on concerns about economic growth and a potential slide in fuel demand in the event of a full recession later this year.

In the week ending May 5, total motor gasoline inventories fell by 3.2 million barrels and were approx 7% below The five-year average for this time of year. EIA data shown. Distillate fuel inventories fell by 4.2 million barrels last week and are 16% below the five-year average for this time of year.

According to a Reuters market analyst John KempThe prevalence of gasoline cracks remains strong ahead of the driving season, but diesel cracks are weaker amid concerns of Weakening demand for dieselone of the first signs of a looming recession.

Refining margins have softened since the fourth quarter of 2022, but are still above historical standards, executives at some of the largest US refiners said in their first-quarter earnings call earlier this month.

“Despite recent declines, refinery margins remained well above mid-cycle, but fell from distillates to 22% levels. The overarching theme for 2023 is a recovery in jet fuel and gasoline demand, supported by a stronger summer driving season,” Thomas Nembley, Chief Executive Officer to PBF Energy He said In early May.

Marathon Petroleum CEO Mike Heneghan also expects strong refining margins this year, though not as high as at the end of last year.

“We believe supply constraints and growing demand will support strong refining margins throughout 2023. Cracks have declined from 2022 levels but remain above historical mid-cycle levels,” Hennigan said. He said on an earnings call.

“In line with what we said last quarter, we remain bullish on the driving season and gasoline strength is expected to improve the position for diesel, while aircraft demand continues to improve. As we go through the year, a lot will depend on the continued recovery in China and the extent of the effects of the recession , If any “.

Despite upbeat views on summer fuel demand, oil prices have fallen by $10 a barrel since mid-April, erasing gains made after OPEC+ announced additional cuts through the end of the year.

Concerns about the economy and rising interest rates overshadowed signs of market tightening later this year, according to analysts and forecasters, including the International Energy Agency (IEA). He says.

“However, the current market pessimism stands in stark contrast to the tighter market balances that we expect in the second half of the year, when demand is expected to exceed supply by about 2 million barrels per day,” the IEA said in its report. Oil market report this week.

According to the International Energy Agency, the recovery in oil demand in China continues to exceed expectations, with demand in March reaching an all-time high of 16 million barrels per day.

However, economic data out of China weighs on sentiment, and many oil market participants see China’s post-reopening economic recovery as disappointing.

“The risks remain to the downside amid a slow recovery in China, uncertainty about the US economy and banking system, and the impact of higher interest rates on demand,” said Craig Erlam, senior market analyst at OANDA. comment Tuesday.

“Brent may simply consolidate for now in a $70-80 range, with a move lower here likely to be difficult as the US seeks to refill SPRs at these levels, while OPEC+ will not hesitate to pull the trigger. If prices go down too much.”

By Tsvetana Paraskova for

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