Brent Price Divergence Sparks Concern Over Refining Economics
Brent crude prices have been on the rise, but analysts at Societe Generale are warning that the current price may not accurately reflect the market's true value.
The divergence between physical Brent and futures has become a major concern, with Dated Brent trading at a substantial premium of over $20/bbl. This is a significant increase from the usual fluctuations around zero since 2017, with only temporary spikes during major supply disruptions.
Societe Generale analysts Michael Haigh and Jeremy Sellem note that diesel strength implies Brent should be above $150/bbl to restore historical refining economics. They argue that the longer the conflict lasts, the more crude scarcity will converge with the diesel scarcity already priced into the market.