Happy déjà vu year from your fossil fuel friends!

It’s déjà vu because there won’t be much of a change in short-term, refined product pricing when compared to the tempestuous pricing we all experienced in 2022.

All the same players are seated at the metaphorical Texas Hold ‘em poker table that can sway short- and long-term price movements. On the domestic supply versus demand side, inventories of crude, gasolines, and distillates are still tight. Most notable are the diesel levels, which are 14% below the 5-year average and continuing to fall.

Of more concern for the consumer is the price of gasoline, with inventories now 6% below the 5-year average. This is important because we are now in Never-never land when refiners go into their “cocoonish” maintenance shutdown mode to ready for the summer driving season. Normally this is when pump and rack prices increase due to a shortfall in refinery supply with prices peaking the first week in April.

So, we’ve been there and done that in the past. What will be different this year?

The weekly U.S. inventory report is the benchmark used by analysts worldwide for their guidance on consumer short-term pricing, and it’s now taking a back seat to the economic dalliances and fan fluttering of geopolitics.

The lead actor on the global stage is the price of Brent crude, which has been moving downward this week as reports of a surge of COVID-19 lockdowns in China has all the implications of a reduced demand for all refined products.

Will this trend continue? Depends on the next report from China I guess, and your guess is as good as the veracity of the report and its sources.

Then we have the G7 proclamation of a $60/bbl cap on Russian seaborne deliveries of crude. Russia’s President, Vlad (the Glad) Putin, has now said that anyone agreeing to this cap will be cut off from the supply of all Russian crude and refined products effective February 5, 2023.

This will counter the COVID-19 related drop in demand from China, and the resultant lower global prices for gasoline and diesel as the price for input costs of crude will wipe out any of the drop in pump and rack prices.

It’s “Yawn me a river” time now. Enjoy the nap because it could be a short one. But who knows?

– Roger McKnight – B.Sc., Senior Petroleum Analyst

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