Despite a complex international situation, the oil industry is enjoying some favorable situations.

The demand for fossil fuels remains strong unregarding high prices at the pump in Europe and the US. The WTI is now ( 20th of June) traded at $113 followed closely by the Brent at $108, far from the $74 and $72 in July last year.

Demand is high, especially in Europe and North America. However, the supply is bottlenecked by long backlogs in the shipping and refinement sectors. The diminished oil supply of Russian oil in Europe and the US is also a major factor in the high prices.

In the medium term, this is a positive period for the oil sector (shipping, refineris, freight, insurance etc.) which can gain higher margins in comparison to previous years.

Chinese refined products export cutouts, and the ban in Europe and the US on Russian oil, have led to a constrained refining capacity.

Picture: Oil refinery

The Economist report that refineries were able to multiply 6 times their revenues, with margins of up to $60 in June 2022. (a)

Europen ban imports on Russian oil products are also biting quite hard. Russia might have been forced to reduce by around 1.4 BBP its refining capacity in May 2022.

Now European end markets are seeing a surge of clean product imports by Suez and Aframax (Gasoline, Gasoil, Diesel, Jet fuel, etc.) from Asia and the Middle East.

This situation is helping the clean products shipping sector in the European routes. Tankers rates and insurance premiums have been steadily rising, amid geopolitical tensions in the regions of the Black and Baltic sea.

Rates have been soaring for LNG carriers too, with spot rates more than double over the previous year. (b)

All in all, parts of the Oil sector are enjoying a positive juncture with soaring profits.

As one of Sardinia’s main shipping agencies, we at Star Sardinia are ready to support your business with quality and professionality. Discover more about our services here.

Picture: Ship to Ship (STS) Operation

Sources:
(A) https://www.economist.com/finance-and-economics/2022/06/09/refiners-are-providing-a-fresh-source-of-drama-for-oil-markets
(B)
https://www.reuters.com/business/energy/lng-tanker-charter-rates-hit-record-highs-demand-soars-2022-06-13/#:~:text=Spot%20rates%20for%20transporting%20160%2C000,of%20business%20intelligence%20Jason%20Feer.