Global Fuel Markets 'Tight and Inflexible,' Vitol CEO Says

Vitol Group CEO Russell Hardy characterized global fuel markets as "pretty, pretty tight and inflexible," underscoring a significant lack of capacity to absorb current disruptions. Speaking Tuesday at the Asia Pacific Petroleum Conference in Singapore, Hardy noted that refined product inventories worldwide are still declining. "We're still not running enough refining capacity to prevent those draws, and we keep eating into the surplus that exists around the world," he said.

The constraints are evident in the downstream sector, with limited refined product flows despite increased crude oil shipments from the Middle East. Refinery capacity faces pressure from geopolitical events, including strikes in Iran impacting its refineries and drone attacks by Ukraine on Russian facilities, which have also led to Russia's ban on diesel exports. In the U.S., refineries operated at approximately 98% utilization in the week ending August 28, with some regions exceeding 100%, according to EIA data. These high utilization rates, achieved by delaying maintenance, are considered unsustainable in the long term.

ING commodity strategists noted that the global refining system possesses minimal buffer capacity to address current supply interruptions.