U.S. crude oil refineries plan to keep running near full throttle this quarter, according to executives and estimates, as refiners set aside worries about recession and sliding retail prices to deliver more fuel.
The operating levels will keep U.S. gasoline prices below their spring highs while providing strong earnings to refiners, analysts said. Many aim to run at rates similar to the second quarter’s 94% average utilization rate.
Oil prices dropped nearly 3% in volatile trading as recession worries raised uncertainty over global crude demand, even as markets awaited clarity on talks to revive a deal that could allow more Iranian oil exports.
Brent crude futures fell 2.9% to settle at $92.84 a barrel, after hitting a session high of $95.95. West Texas Intermediate crude (WTI) decreased 3.2%, settling at $86.53 a barrel, after rising to $90.65.
Futures have fallen over the past few months, as investors have pored over economic data that has spurred concerns about a potential recession that could hurt energy demand.
British consumer price inflation jumped to 10.1% in July, its highest since February 1982, intensifying a squeeze on households.
The oil market remains in a multi-year tightening cycle, RBC Capital’s Mike Tran said, adding that investors are in search of near-term upside catalysts.
“The recession fears are well acknowledged, but the bullish catalysts such as the return of China or supply degradation from Russia remain elusive,” he added.
The oil complex is “advancing off the big (U.S.) crude stock draw, increased product demand and (the) apparent stall in Iranian nuclear negotiations,” analysts at energy consulting firm Ritterbusch and Associates said in a note.
U.S. crude stocks (USOILC=ECI) fell by 7.1 million barrels in the week to Aug. 12, Energy Information Administration (EIA) data showed, against expectations for a 275,000-barrel drop, as exports hit a record 5 million barrels per day (bpd).
Bans by the European Union on Russian exports could dramatically tighten supply when curbs to seaborne crude and products imports into the bloc ramp up in coming months and drive up prices, analysts warn.
“The EU embargoes will force Russia to shut in around 1.6 million (bpd) of output by year-end, rising to 2 million bpd in 2023,” consultancy BCA Research said in a note. “EU embargoes on Russian oil imports will significantly tighten markets and lift Brent to $119 a barrel by year-end.”
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