TotalEnergies CEO Patrick Pouyanné has highlighted a peculiar divergence in the oil market following the Persian Gulf conflict. Middle Eastern oil producers, who accumulated significant crude reserves during the conflict, are now aggressively trying to sell these stockpiles. This oversupply has led to a collapse in crude prices, with Brent crude hovering around $72 a barrel, even as tensions have de-escalated.
Conversely, prices for refined products like gasoline and diesel are indicating a crude oil cost of $95 to $100 per barrel. This significant gap is attributed to ongoing shipping concerns, particularly the reluctance of shipowners to navigate the Strait of Hormuz. Despite the easing of broader tensions, the bottleneck in shipping keeps the supply of refined products tight, creating a unique situation where crude prices are falling while product prices remain elevated.
Pouyanné estimates that it will take approximately three to four months for the market to rebalance. This period is expected to see a gradual normalization of shipping patterns and the integration of the excess crude into the system. This rebalancing will be crucial in determining whether crude and product markets converge and how this will ultimately impact consumer fuel costs, especially with OPEC+ potentially increasing output and Hormuz traffic recovering.
