By Adedapo Adesanya
Oil prices increased by more than $1 on Monday amid European diesel demand, constrained by Russian sanctions and shipping disruptions, with the Brent crude futures up by $1.41 or 1.73 per cent to $83.03 per barrel and the US West Texas Intermediate crude futures (WTI) up by $1.48 or 1.93 per cent to $77.97 per barrel.
A slump in refining activity in the US and disruptions to global trade have tightened diesel supplies in recent weeks, dampening historically high US diesel exports to Europe this month.
US diesel cracks briefly surged to a four-month high of more than $48 a barrel this month, crimping arbitrage opportunities to ship the fuel to Europe.
Europe’s imports of US diesel have nearly halved so far in February to 6.65 million barrels, down from a seven-year high imports of 11.44 million barrels in January, according to an analysis by ship tracking firm Kpler cited by Reuters.
The lower imports of US diesel have added to Europe’s current struggles to secure distillate volumes, amid tightening supply due to the Red Sea shipping disruptions.
This development took away the market’s attention and worries about possible disruptions emanating from the Red Sea.
Iran-aligned Houthi rebels in Yemen narrowly missed hitting a US-flagged tanker on Saturday, while another vessel hit by the rebels last week was abandoned and has been seen leaking fuel in the Red Sea.
As the Israel-Hamas conflict continues in the Middle East, White House officials say negotiators for the US, Egypt, Qatar and Israel had agreed on the basic challenges of a hostage deal during talks in Paris but were still in negotiations.
Many tankers are now avoiding the Red Sea/Suez Canal route and supply values to Europe from Asia have become more expensive as freight and insurance rates have jumped and vessels are making a longer trip all around the Cape of Good Hope in Africa.
The International Maritime Organization (IMO) has warned shipping companies to be on high alert for piracy after vessel seizures in the Gulf of Guinea and off the Somali coast, following the exploration of alternative routes.
