Gulf Oil's Tom Kloza: The world has lost about 7 million barrels a day of refining capacity
Speakers
Tom Kloza
— Chief Energy Advisor, Gulf Oil
Summary
Tom Kloza, Gulf Oil chief energy advisor, discusses record diesel prices and the global refining capacity shortage. He argues diesel is the most vulnerable refined product and could go much higher because the world has lost about 7 million barrels per day of refining capacity, leaving the market short as demand seasonally rises. He expects gasoline prices to top out and not reach $5 by the midterms. He also flags EU windfall-profit tax or export-curb talk as a possible risk to speculative long positions in diesel/gas oil futures.
- U.S. diesel prices hit a record, up about $1 per gallon over the past month.
- Wholesale refined product prices are moving sharply even when crude oil is little changed.
- Tom Kloza says global refining capacity losses and refinery outages leave product markets short, especially diesel.
- Diesel is entering seasonal demand and is also used for home heating in Europe.
- Speculative money is long gas oil and ultra low sulfur diesel futures.
- EU windfall-profit tax or export-curb discussions could spook speculative diesel longs.
- Kloza expects gasoline to top out and does not see $5 gasoline by the midterm elections.
- Diesel is described as an untethered market that could go much higher.
Ideas
Diesel likely goes much higher.
Tom Kloza is bullish on diesel/distillate because the world has lost roughly 7 million barrels a day of refining capacity, mainly from drone attacks in Russia, the Persian Gulf, and the Red Sea, leaving the product market short just as diesel enters seasonal demand. He says refinery outages face zero tolerance, diesel is the most-used refined product, European diesel is also used for home heating, and the market is untethered; he thinks $6.47 could later be remembered as low. He sees policy talk about EU windfall-profit taxes or export curbs as a possible risk that could spook speculative long positions in gas oil and ULSD futures.
