“Crude oil is bearish, refined oil products are in high demand”! European energy giants reveal a rare split in the oil market, fuel premiums approaching a 15-year high

The Zhitong Finance App notes that, according to the CEOs of Europe's largest energy companies, the global oil market has fundamentally divided: the outlook for crude oil is bearish, but the price of refined oil products is bullish.

Patrick Pouyanne, CEO of Total Energy, said that crude oil carriers can now pass through the Strait of Hormuz in a “very low profile”, but due to high transportation costs, no tankers are following this route. Meanwhile, drone attacks in Ukraine have drastically cut fuel supplies from Russia.

Pouyanne said at the ONS conference in Stavanger, Norway on Monday that “the crude oil market is bearish and the refined oil market is bullish, which is very strange,” and “our consumers in Europe will suffer because of this,” while in the US, “gasoline prices will not drop below $4 as President Trump would like.”

Shell CEO Wael Sawan said the refined oil market is being squeezed by the “triple threat” of attacks on Russian refineries and dangerous Persian Gulf and Red Sea shipping. He said the company is working to extract as much refined oil products as possible from its own assets.

Sawan said at the same event, “We are facing a difficult few months, and we need to continue to focus on doing what we can to ease the pain of our customers.”

Their remarks reflect growing concerns about how the Middle East conflict is affecting specific market segments around the world, which has had a significant impact on the wider economy.

Benchmark crude oil is trading at close to $90 a barrel in London, far below the price at the beginning of the war. However, the premium for refined oil products, such as diesel, over crude oil is close to its highest level in more than 15 years.

Pouyanne said a very large crude oil tanker (VLCC) that can load 2 million barrels of oil would cost around $20 million to cross the Strait of Hormuz. The additional costs are too expensive for smaller vessels carrying refined oil products, “so no one of the tankers is leaving the Strait of Hormuz,” he said.

The Total CEO said that Ukraine's drone attacks on Russian refineries have reduced the country's fuel supply by 3 million to 3.5 million barrels per day.