Fuel Flash – April 2024

As most oil analysts expected, it’s being reported that OPEC+ has decided to continue production cuts for at least another three months. Oil began March in the upper $70s per barrel as the market seemed to have already priced in this potential outcome. Global demand and supply seemed to be at a stalemate, causing oil prices to be steady for now. The following graph shows the daily price movements over the past three months:

By mid-month, oil prices had crossed $80/barrel and would stay above that mark for the rest of March. The major changes causing prices to rise could be attributed to increased tensions in the Red Sea and Ukrainian drone attacks on Russian refineries. The Red Sea is a key to transportation of oil and Russia is one of the largest producers in the world. These two factors caused fears of supply tightening, which caused prices to suddenly spike.

The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

Diesel wholesale and retail prices were relatively flat during March. Profit margins for suppliers were down slightly. Gasoline wholesale and retail were both on the upswing, but wholesale outpaced retail, causing margins to decrease. The following graph shows the retail margins over the trailing 15 months:

According to AAA, gas prices finished at approximately $3.52/gallon in March, another surge of $0.22/gallon compared to last month. Diesel prices were down about $0.04 in March, finishing at $4.03/gallon.

Oil concluded March above $83/barrel. Ukraine’s drone attacks on Russian refineries have negatively affected the supply picture, limiting Russia with about half of their typical production. Things have escalated to a point where the U.S. has urged Ukraine to stop these attacks on fears of global fuel prices rising. Chinese demand remains weak which was helping depress oil prices, but current supply concerns are weighing heavier on the market and inflating oil prices for the time being.

Sokolis will continue to monitor the many factors going into fuel prices. We currently anticipate that oil prices will range between $80-90/barrel in the near term.