Saudi says low refining capacity causing fuel-price jump

A lack of refining capacity across the world is leading to a surge in the gap between the price of crude oil and fuels, according to Saudi Arabia’s energy minister.

The difference “is in some cases 60 per cent,” Prince Abdulaziz bin Salman said at a conference in Riyadh on Monday. “If the signals of the market are not conducive, people will refrain from investing,” he said.

Crude and refined-fuel markets are strongly backwardated, a bullish pattern marked by near-term futures commanding a premium to those further out. The downward-sloping curve means the long-term price assumptions companies use are much lower than current levels, which can discourage investment in production and refining.

Crude prices have surged to around $110 a barrel in the past year, first as demand recovered from the coronavirus pandemic and then after Russia invaded Ukraine.

Refined products have risen significantly more than crude since Russia’s invasion, with diesel trading at record highs in the US.