Why has Brent crude climbed 18.8% in the past month?
Brent is 104.32, up 18.8% over the past 30 days, and a customer buying on a rack tied to it is paying for that whether or not anyone has told him why. I went through what our data desk pulled to see what is actually driving it.
The wire points one direction first. The heaviest fuel coverage over the last two weeks was Prices, then Diesel & Freight, then Refining & Markets, and the refinery headlines are almost all one story: Ukrainian drone strikes on Russian refineries. Zelensky confirmed a strike on the Ilsky refinery in Krasnodar Krai. The Perm refinery, reported as Russia's seventh-largest, went offline after a Friday attack. One tally put it at six Russian refineries hit in a single week.
The obvious read is that the strikes lifted crude, but the mechanism runs the other way. Taking out a refinery removes refining capacity, not crude. The oil those plants would have run has nowhere to go, which tends to push products up rather than the barrel. If outages were the whole story, diesel and gasoline would lead and crude would lag. So I checked which moved more.
Products did not lead. Brent's gain ran ahead of WTI, which is up 12.4%, while gasoline is up 9.3% and diesel up 15.5%. Crude ran ahead of both on the Brent number, the opposite of what a pure refinery-outage story would produce.
The crack spread says the same thing from the other side. The 3:2:1 crack is 68.19, down 2.18 over the 30 days. That spread is roughly what a refiner earns turning three barrels of crude into two of gasoline and one of diesel, and it narrowed over the month. Crude outran the barrel of products it makes. A refiner buying crude at these levels earns a little less per barrel than a month ago, even with pump prices up.
So the strikes are real and they matter, but they are not moving crude by taking out refining. The cleaner explanation is that the same attacks have the market pricing in risk to crude barrels reaching the water, and Brent carries that risk more directly than WTI. Brent is the seaborne benchmark and WTI is landlocked American crude. When the two pull apart the way they have this month, the pressure is showing up on the international side of the market. The wire backs that up: International was among the most-covered sectors, and every refinery dateline is Russian.
The diesel numbers are where operators should look hardest. US diesel is 6.529, up 15.5%, and 6.529 is also its 30-day high, so it is at the top of its range right now. Gasoline is 4.61 against a high of 4.628, also near its top. Russia is a large diesel exporter, and taking its refineries down pulls diesel out of the global pool faster than gasoline. Diesel leading gasoline, up 15.5% against up 9.3%, fits that.
One more number cuts the other way. The diesel retail-to-wholesale spread is 1.639, up 0.255 over the month. So the refining crack narrowed while the retailer's margin over the rack widened. Those are two different margins on the same fuel, and this month they moved in opposite directions. If you run trucks, your fuel cost is at the top of its month either way. If you sell diesel at retail, the past month has been a good one on margin, and in a rising market holding any spread takes work.
Natural gas is the odd one out and worth a line so it is not read into the same story. Henry Hub is 3.196, up 12.5%, with its own high at 3.343. Gas rising alongside crude in the same month does not mean the same cause. Gas moves on weather and storage, and I have nothing here tying it to the refinery strikes, so I am treating that 12.5% as its own story.
What I am sure of: crude led products this month. Brent led WTI. And the strikes on Russian refineries line up with diesel leading gasoline. The move is coming off the international supply side more than off US refining. What I am not sure of is how much of that gain is durable. Brent is already off its 30-day high of 108.75, and WTI is well off its high of 105.83, so some of the peak has come out even with a big gain still on the board. Whether the risk premium holds depends on whether the strikes keep landing and Russian export barrels keep getting disrupted, and I cannot call that from a price table.
For an operator the read is plain enough to act on. Diesel is at the top of its month and could stay firm while Russian refining is under attack, so lock what you can on the buy side and do not assume this reverses next week. If you sell diesel, the margin over wholesale has been working in your favor. And if you were about to blame your local refiner for the pump, the crack spread says he made less per barrel this month, not more.
What to watch this week: whether another Russian refinery goes down, and whether diesel holds its 30-day high.