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Diesel leaps to 4-month high with supply squeeze worsening
Disruptions in the Strait of Hormuz, damage to Persian Gulf refineries and a wave of Ukrainian strikes on plants have constrained diesel shipments
A diesel fuel pump on a pier in Stonington, Maine. (Graeme Sloan/Bloomberg)
Key Takeaways:
- Diesel prices rose to a more than four-month high as attacks on refineries further tightened supplies disrupted by conflicts in the Middle East and Ukraine.
- ICE gasoil futures climbed as much as 4.2%, while diesel prices have surged more than 50% since June 18, outpacing oil-price gains.
- Goldman Sachs more than doubled diesel refining-profit forecasts as refinery disruptions and Ukrainian drone strikes on Russian plants continue constraining supply.
Diesel rose to the highest in more than four months after fresh attacks on refineries further tightened a market already dealing with a drop in supply due to wars in the Middle East and Ukraine.
The increase in the cost of the workhorse fuel of the global economy adds to inflationary concerns amid broader pressure on the price of basic goods.
READ MORE: Diesel crack spread surges to record $106 a barrel
ICE gasoil futures, the global diesel benchmark, climbed as much as 4.2% to their highest level since April 9. The fuel’s premium to Brent crude, known as the crack spread, remains elevated, having risen to the highest on record last month. It is also trading at an increasing premium to supplies in Asia.
Disruptions in the Strait of Hormuz, damage to Persian Gulf refineries and a wave of Ukrainian strikes on plants have constrained diesel shipments from regions that account for around a third of global production.
Goldman Sachs Group Inc. more than doubled its forecasts for profits from making diesel in recent days, partly as Ukrainian drone strikes on Russian refineries continue.
Diesel prices have jumped by more than 50% from a low on June 18, outpacing gains in oil prices over the period.
