Oil CEOs warn of bearish crude but surging fuel prices

The global oil market has fundamentally diverged, with crude prices under pressure even as refined fuel products command near-record premiums, TotalEnergies ↗ 2.31% CEO Patrick Pouyanne said Monday at the ONS conference in Stavanger, Norway.

A "Very Strange" Market

Pouyanne described a market in which crude oil trades near $90 a barrel in London — well below peaks seen earlier in the conflict — while the premium for products such as diesel relative to crude has climbed near its highest level in over 15 years. "You have a bearish crude oil market and a very bullish product markets, which is very strange," Pouyanne said. He warned that European consumers would bear the cost and that US gasoline prices were unlikely to fall below $4 a gallon "as President Trump would like."ndtvprofit+2

Shell ↗ 2.25% CEO Wael Sawan, speaking at the same event, described a "triple threat" squeezing refined products: Ukrainian attacks on Russian refineries, and dangers to shipping in both the Persian Gulf and the Red Sea. Shell is working to maximize refined product output from its own assets, Sawan said.ndtvprofit

Hormuz Open for Crude, Closed for Products

While crude cargoes are transiting the Strait of Hormuz "very quietly," the economics are prohibitive for smaller product tankers, Pouyanne explained. Shipping a very large crude carrier capable of holding 2 million barrels through the strait costs roughly $20 million, but the proportional cost for smaller refined-product vessels is too high, resulting in no product tankers making the journey. Ukrainian drone strikes have meanwhile curbed Russian fuel supplies by 3 million to 3.5 million barrels per day, further tightening global product availability.investing+2

Asia Bears the Brunt

A Reuters analysis published Monday highlighted that the debate over crude volumes transiting Hormuz — including disputed claims by U.S. Energy Secretary Chris Wright that flows are higher than vessel-tracking firms estimate — masks a deeper crisis in refined fuels. Asia's imports of light and middle distillates have fallen 21% from the three-month average before the Iran conflict began in February, a drop of roughly 1.49 million barrels per day, according to data from Kpler cited by Reuters. The pain is unevenly distributed: less wealthy nations such as Indonesia and the Philippines are seeing sharper import declines, while wealthier importers like Australia are securing similar volumes but at far higher cost. Singapore gasoil refining margins stood at $71.29 a barrel on August 21, up 226% from the day before the conflict started.reuters