Oil hits pre-war lows as OPEC+ readies another output increase
Crude fell to pre-war lows this week. Reuters reported that sources expect OPEC+ to approve another output increase, with the Middle East calmer. If the group adds barrels, wholesale prices could ease further.
The OPEC+ hike
The read from the group is that with less risk premium priced into the barrel, there is room to pump more. Reuters reports the increase is close to settled. Free Malaysia Today framed it the same way, quotas up as the region settles.
Cheaper crude is the feedstock story jobbers care about. If OPEC+ follows through and adds supply into a market already at pre-war lows, street pricing could keep softening. Watch your crack spread rather than the flat crude number. Weak crude helps the refiner's input cost, but rack margins depend on whether product prices fall as fast as the barrel does. When they lag, the refiner keeps the difference and the discount reaches your terminal slowly.
The refinery war
Ukraine has been hitting Russian oil refineries, and Moscow, after four years of striking Ukrainian CHP plants and refineries itself, now objects to the return fire. A Ukrainian expert laid out the conditions under which Kyiv would consider it has the right to strike Belarusian refineries too.
Belarus just raised gasoline supplies to Russia to a historical maximum, which matters to a US operator because it could put Belarusian refineries on Ukraine's target list. Refining capacity knocked offline is product that has to come from somewhere else, and that keeps a floor under global refined-product prices even while crude sinks. That pushes the other way from the OPEC+ effect.
US refining capacity
India's prime minister, pitching a new ₹79,450 crore refinery, said no oil refinery has been built in the US in 50 years and called US capacity the fourth highest in the world. US refiners run hard on an aging, static base, which is why an unplanned outage at a single large plant moves regional rack prices more than it should. Because there is little spare capacity, a soft crude market does not always bring cheaper diesel.
What to watch
The date and size of the next OPEC+ increase, and whether product prices follow crude down or hold up on tight refining. If Ukraine strikes Belarusian refineries, watch for a bid under distillate that offsets the cheaper barrel. The crack spread usually moves before the flat crude price does, so track it more closely than the barrel.