Product Supply Snags Oil Market as Refining Capacity Takes a Hit

Richard Redoglia, CEO of Matrix Global, says refineries are facing challenges due to disruptions in refining capacity, particularly in Russia and the Persian Gulf. He notes that global crude production capacity is higher than demand, but the problem lies in product supply.

According to Redoglia, there's a significant difference between crude availability and refining capacity. Global crude demand is around 103-105 million barrels per day, while crude liquids capacity is estimated at 110-113 million barrels per day. However, global refining capacity is only around 105 million barrels per day.

Redoglia points out that the Persian Gulf region has seen a reduction of around 1.2 million barrels per day in refining capacity, and Russia has lost almost 2 million barrels per day. This has led to refiners competing for crude oil to maintain product supplies, resulting in higher prices.

The disruption has been particularly significant for diesel and other refined products. Redoglia expects crude oil prices to fall below $70 per barrel within a year, by around September 2027.