Bloomberg News reports that the surge in the cost of fuel which is occurring globally is beginning to weigh on demand as per the biggest independent trader of oil in the world.
What is this all about?
According to the Vitol Group’s head of Asia, Mike Muller, due to a run-up in diesel, oil products, and gasoline, consumers are being hit, while speaking on Sunday on a podcast, which was being produced by Gulf Intelligence which is Dubai-based.
Muller also said that it is evident that there is economic stress due to the surging costs, and what some people are referring to as demand destruction. Muller is based in Singapore and thinks that it is also liquified natural gas and not just an oil price surge.
The costs of refined fuel have attained record highs in the United States in the current year and have spiked in most countries across the globe, thereby giving a rise to inflation. It was found that these have increased more in comparison to crude oil, which itself is up by about 45% to $110 per barrel in a larger part due to disruptions in Russian flows after the invasion of Ukraine by Moscow and the imposition of sanctions. This has given rise to a spare capacity shortage globally that is further triggered by underinvestment over the years in the sectors of a refinery.
On Friday, Bloomberg News also reported that Exxon Mobile Corp stated that the second-quarter earnings from refineries increased to $5.5 billion. Muller of Vitol said that the levels of refining margins are now at levels that no one could have forecasted. However, it seems as per the consensus that it may not be able to go beyond this.
There are chances that the price of fuel will remain at today’s levels if there is continuing demand in China while recovering as restrictions related to coronavirus are eased. Last month, the Chief Executive officer of Vitol, Russel Hardy told Bloomberg that he anticipates consumption of oil in China might increase by 1 million barrels daily by 2022 end.
But there is doubt as Muller says that whether there will be an increase in the fuel export quotas sooner or not, although the independent refiners can increase production.
