In response to forecasting alterations, the International Energy Agency (IEA) paralleled its supply and demand predictions with OPEC+ production expectations that catapulted an uptick in the markets. Crude rose almost $3 on Wednesday, and the good fortune continued into Thursday, with Brent crude trading at $85.23, a 1.43 percent rise for the day. West Texas Intermediate (WTI) additionally rallied with a 1.77 percent increase on the same day to $81.13 per barrel.
The revisions were motivated by the Red Sea shipping lanes becoming plagued with Houthi attacks and the potential to disrupt the supply chain. With commercial vessels now being rerouted around Africa’s Cape of Good Hope, the IEA reasons that oil inventories on land declined for the seventh consecutive month in February. As a result, the turmoil incurred has weakened the Atlantic Basin market, instigating a “backwardation” in forward pricing structures.
“Longer shipping routes and faster vessel speeds saw Singapore bunkering reach all-time highs. That, along with surging U.S. ethane demand for its petrochemical sector underpins upward revision to our global oil demand expectations for this,” said the IEA in its March Oil Market Report (OMR).
Still, the IEA has stuck to an upward revision track since November 2023, adding that the “global economic slowdown acts as an additional headwind to oil use,” although the international energy agency noted a significant increase in the energy transition pace in May 2021, countering the need for new oil and gas exploration efforts.
According to its OMR, the IEA foresees a continuation of OPEC+’s voluntary cuts throughout the year, which was the other motivating factor in its realignment decision. Reuters quoted Dennis Kissler, BOK Financial’s senior vice president, who noted that near-six-month-high crack spreads were prompting refiners to process more crude oil.
“Demand is staying high, while supplies are getting tighter, particularly on the fuel side,” said Kissler. “The refining margins are also very strong and a positive for crude demand.”
With predictions being made and the experts attempting to navigate uncertain times, the oil market received another component of influence with an attack made Wednesday on Rosneft PJSC’s Ryazan refinery, which primarily produces diesel exported to international markets. Located southeast of Moscow, 450,000 bpd of Russian crude production was halted. Approximately 50 percent of that diesel fuel and 10 percent of its gasoline production totals are exported.
While Ukraine responds to Russia’s invasion with military attacks, Russian energy infrastructure targets are growing in popularity in the latest series of drone attacks. If practical, continual disruption to Russian refining could potentially drive global diesel prices upward. Influence from multiple vantage points will all play a role in the overall future of global pricing.
Nick Vaccaro is a freelance writer and photographer. In addition to providing technical writing services, he is an HSE consultant in the oil and gas industry with twelve years of experience. Vaccaro also contributes to SHALE Oil and Gas Business Magazine, American Oil and Gas Investor, Oil and Gas Investor, Energies Magazine and Louisiana Sportsman Magazine. He has a BA in photojournalism from Loyola University and resides in the New Orleans area. Vaccaro can be reached at 985-966-0957 or nav@vaccarogroupllc.com.
