Why oil prices are about to surge

Global oil prices are on the brink of a significant surge, driven by a deepening energy supply crunch that is disproportionately affecting refined products like gasoline, diesel, and jet fuel. Despite current crude oil prices being around 30% below their March peak, analysts warn of a false sense of security as underlying market distortions intensify.

The conflict in Ukraine has escalated, striking deep into Russia's economic heart by damaging its refining capabilities. Estimates suggest that between 25% and 45% of Russia's refining capacity is now offline. This has led to severe domestic fuel shortages, with motorists in Moscow facing days-long queues and Crimea reportedly running out of petrol entirely. In response, Russia has banned diesel exports, a move that Deputy Prime Minister Alexander Novak acknowledged is causing public concern.

“

Refined fuels are the more broken part of the chain.

Analysts like Saul Kavonic of MST Financial highlight that while crude oil supply is temporarily stable, the real crisis lies in the "broken chain" of refined fuels. The ongoing geopolitical tensions, particularly the fragile ceasefire in the Middle East and the conflict in Ukraine, coupled with the looming U.S. mid-term elections, create a volatile environment. With time running out to resolve these issues, the market is increasingly vulnerable to a sharp price increase.

“

The current situation at filling stations is causing concern among the public.