General Index Oil Refinery

Global Market Analysis, 04 February 2022

- Brent above $93/b on US winter storm disruption after OPEC+ underwhelms
- Gasoline hitting $4/gal this summer in US may fall short of the goal line

Brent above $93/b on US winter storm disruption after OPEC+ underwhelms

Oil prices were on course for another week of gains after Brent futures surpassed $93/b on Friday as US oil supplies came under threat from winter storms, writes Virginia Bridgewater.

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It had not been all plain sailing for the bulls. After a strong start as geopolitical risks swirled, profit-taking took prices back below $90/b despite OPEC+’s not-unexpected decision on Wednesday to ramp up oil production by 400,000 b/d in March. But it proved to be a brief pause. Wintry storms which have started hitting the central US region, including Texas, roiled markets as the weekend approached, and prices climbed once again to move up by some $5/b week on week. Some oil production in the Permian Basin has been disrupted and more than 3,500 flights have been cancelled.

OPEC+’s decision reflects the current low stock levels and lack of near-term spare capacity. The group resisted pressure from major consumers to raise output further, despite crude benchmarks hitting their highest levels this week since October 2014, enjoying an uninterrupted 30% rally in the last two months. Oil is now widely predicting to hit $100/b this year, rising further into 2023. General Index assessed Dated Brent reached US$93.39/b on 3 February, while General Index Dubai Partials (M1) hit $88.37/b on 31 January, just before Chinese New Year, re-emerging to top $90.25/b on 4 Feb.

Global benchmark Brent futures (M1) was testing levels above $93/b a little after 1200 London time on Friday. While in the US at the same time, WTI futures (M1) was as high as $92.32/b. Bullish oil prices are being exacerbated by growing geopolitical tensions. The Pentagon is sending around 2,000 US soldiers to Europe in the coming days, with another 1,000 mobilised from Germany. Putin has increased forces near Ukraine to well over 100,000.

The United Arab Emirates said it intercepted a further three hostile drones in its airspace on midweek. The UAE did not name Yemen’s Iran-backed Houthi group, who have also not claimed the attack, despite three similar actions against the UAE this year. There was no immediate reaction from the oil markets. In the US, crude stockpiles fell by 1mn b last week. The EIA reported new seasonal highs in total product demand with inventories, excluding gasoline, hovering around five-year lows.

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Meanwhile the US dollar weakened as US Federal Reserve officials this week turned reticent about an interest rate increase in March, despite last week’s declaration by chairman Jerome Powell that they were ready to raise rates to curb the strongest inflation in four decades.Iran’s oil minister added to the downside risks when he said Iran was ready to return to the oil market but he gave no further details, suggesting new availability will not be immediately forthcoming.

In Europe, a cyberattack on Mabanaft’s German branch, which distributes diesel, gasoline and heating oil, led the company to declare a force majeure for its inland supply. Hundreds of filling stations had payment disruptions while Oiltanking Deutschland GmbH, which shares parent company Marquard & Bahls with Mabanaft GmbH & Co, also had operations at its Amsterdam-Rotterdam-Antwerp terminals disrupted.The Chinese New Year saw a sharp drop in China’s domestic flights but this is expected to rebound after the holiday, although China’s strict border controls in light of the Winter Olympics zero-Covid policy could also affect flight numbers.

Gasoline hitting $4/gal this summer in US may fall short of goal line

The chances of correctly predicting the outcome of this month’s US football Super Bowl will be probably easier than a wager on what gasoline prices are going to do this summer, writes Jeffrey Bair.

Forecasting the gasoline price is overloaded with peril yet remains a favourite armchair sport. The trade group representing US convenience stores, NACS, this week in an article raised the possibility of a national average of US$4/gal this summer, even while noting that it can't make predictions. Gasoline demand hit a record last summer in the US, but even that did not drive national average prices over $4/gal.

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Here are the cases for and against it getting to $4/gal this year:


- Supply as reflected by national gasoline stockpiles right now is tighter than it was at this time in the first quarter of 2021. It's about 2% lower and is sitting right now at about 250mn bl, according to Energy Information Administration data.

- Stronger gasoline components. The spread between finished gasoline, or "M grade," and CBOB blendstock this week widened from under 5cts/gal to over 7cts/gal in Colonial Pipeline trade, according to General Index data. M is used to price gasoline components, including high-octane gasoline, and also is the basis for naphtha to make reformate. So its relative strength points to more interest in gasoline production. Those components are used to blend gasoline at summer specifications, and this development on M points to stronger demand from refiners and blenders for these boutique grades.


Weak demand. The moving average for gasoline supplied to the market is well below December levels. A lot of that has to do with the winter cold snaps keeping drivers off the roads. A rise in demand would help support retail pricing at $4/gal.

- The effect of a third-consecutive summer of coronavirus on vacationing if a new problematic Covid-19 variant emerges

Virginia Bridgewater
Virginia Bridgewater, Pricing Director, LPG
++49 (0) 151 2202 6855
Jeffrey Baird, U.S. Refined Products Pricing Director
Jeffrey Bair, US Refined Products Pricing Director
+1 (713) 301 9874
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