Global petroleum markets have become calm again after massive disruptions caused by the coronavirus pandemic, Russia’s invasion of Ukraine, and the sanctions imposed in response by the United States and its allies.
It marks a sharp contrast to the start of the year, when most forecasters expected stocks of crude and fuels to deplete as OPEC+ extended production restraint and the major economies emerged from a slowdown in 2022/23. In the Middle East, fighting between Israel, Hamas, Iran and the Houthis has not disrupted crude production and tanker flows have been successfully re-routed to avoid attacks on shipping in the Red Sea.So far in May, Brent prices have been around $83 per barrel, which is exactly in line with the inflation-adjusted average since 2000, so it is not sending a strong signal to either producers or consumers to change their behavior.
Combined U.S. stocks of gasoline, distillate fuel oil and jet fuel are only 14 million barrels below the ten-year average and the deficit has narrowed since the start of the year. Retail prices for diesel have averaged $3.82 this month, precisely in line with the inflation-adjusted average over the same period.Unsurprisingly, speculative investors have reduced their positions to deploy money more profitably elsewhere as they conclude prices are unlikely to move anywhere in the short term.