Oil prices climbed over 1% Friday after Russia banned diesel and gasoil exports. The move aims to increase Russia’s domestic supply but reduces the global oil market.
West Texas Intermediate crude climbed back above $90 per barrel following the news. Brent futures also gained, topping $94. Energy analysts say the Russian ban will likely sustain upward pressure on oil prices near-term.
Russia is a leading diesel producer globally. How much the export halt affects US fuel prices depends on how long it remains in place, says Angie Gildea, KPMG’s head of energy. But any drop in total global oil supply without lower demand will lift prices.
The ban comes as US gas prices retreat from 2022 highs, now averaging $3.86 nationally. Diesel is around $4.58 per gallon. Diesel powers key transport like trucks and ships. The loss of Russian exports could spur further diesel spikes.
However, gas prices may keep easing for most of the US, says Tom Kloza of OPIS. Western states could see increases.
Kloza believes crude may rise $2 to $3 per barrel in the near-term. But gasoline margins are poised to shrink even if oil nears $100 again. The US transition to cheaper winter fuel could also limit price hikes.
Oil has increased steadily since summer as OPEC+ cuts output. Saudi Arabia and Russia also reduced production. More Wall Street analysts now predict $100 oil in 2023.
Goldman Sachs sees Brent potentially hitting $100 per barrel in the next 12 months. Sharper inventory declines are likely as OPEC supply falls but demand rises, says Goldman’s head of oil research.
The White House has criticized OPEC+ for the production cuts. US gasoline demand recently hit a seasonal record high over 9.5 million barrels per day. Jet fuel use is also rebounding towards pre-pandemic levels.
Strong demand, paired with reduced Russian oil exports, leaves the market more exposed to supply disruptions. Hurricane Ian showed how quickly price spikes can occur.
The Biden Administration plans to keep tapping the Strategic Petroleum Reserve into 2023 to restrain cost increases. But further export bans or output reductions could overwhelm these efforts.
While tighter global fuel supplies might not directly translate to the US, Russia’s latest move signals volatility will persist. Energy prices remain sensitive to supply and demand shifts.
More export cuts could accelerate oil’s return to triple-digits. But for US drivers, the road ahead on gas costs seems mixed. Falling margins and seasonal shifts could limit prices, but risks linger.
