BRENT CRUDE PRICE ($)
OPEC’s oil output ceiling. Apparently, the latest frequent stoppages in Libyan oil fields should not be considered short-lived anymore, since other disruptions at ports will tend to contribute further to longer outages.
Other bullish news that failed to lift prices was the declaration by the government of Alberta, Canada, of mandatory output curbs on local crude oil production and bitumen. The action was taken to alleviate low crude prices and the cash squeeze on its energy industry. These are the first provincial government- dictated production cuts in Canada since the 1980s.
In the US, signs of strain are already visible in the oil industry. Low US gasoline refining margins have turned negative against major US and European crude slates. This is causing huge loses to US refiners who can’t lower refining capacities because they have to produce middle distillates in addition to the light distillates to produce gasoline through this process.
The strong growth in seasonal demand for middle distillates has driven increased gas oil (diesel) prices and refining margins. Therefore, low gasoline yields and high gas oil refining margins have resulted in refiners maximizing diesel output instead of gasoline production.
The EIA reported that by the end of November, high gasoline inventories helped drive US refining margins to five-year lows. This is coupled with high levels of refinery output as US refiners keep refining at high capacity. That has contributed to low gasoline refining margins globally.
US gasoline prices declined for the ninth consecutive week. The US has continued to export gasoline despite the decline in domestic gasoline stocks. For the last week of November, the US exported more crude oil and petroleum products than it imported since records were kept beginning in 1991.
Gasoline refining margins in Europe turned negative in mid- October for the first time in nearly five years amid high inventories and weaker demand in the Atlantic basin. Since then, Europe’s refineries have reduced their gasoline output and depended more on gasoline imports from the US. European refineries are now focused mainly on the relatively strong diesel refining margins.