Following a softening of fuel oil prices over the past two weeks, this week has seen an unwelcome increase. This rise was boosted by tight global supplies and the upcoming start to the U.S. summer driving season, where demand for road fuel often peaks.
As U.S. Memorial Day is this weekend, travel in the U.S. is expected to be the busiest in two years. Despite the high fuel prices, more American drivers are expected to hit the road following last year’s coronavirus pandemic restrictions.
According to market sources citing American Petroleum Institute figures, while U.S. crude stocks rose by 567,000 barrels last week, gasoline inventories fell by 4.2 million barrels. Distillate stocks also dropped by 949,000 barrels, adding to the hike in prices.
"We're not seeing any elasticity in refined products demand," said Gary Cunningham, Director of Market Research at Tradition Energy. "People are still going to drive; people are still driving."
Global crude oil supplies continue to tighten as buyers avoid oil from Russia, the world's second-largest exporter, after the invasion of Ukraine, which Moscow calls a "special military operation".
The European Council's president, Charles Michel, said on Wednesday that the EU hopes to be able to agree on sanctions that would phase out Russian oil imports before the next meeting.
In China, Beijing stepped up its quarantine efforts to end the month-old COVID outbreak. Meanwhile, in Shanghai, authorities plan to keep most of the restrictions in place before a complete lifting of their two-month lockdown from June 1st. These disruptions are adding further disruption to supply output.
In the UK, in a week where petrol has reached a new record high, Diesel prices continue to range between £1.77 - £1.99 per litre. For fuel card customers, a rise of up to 1 pence per litre should be expected.
