By Stephanie Kelly

NEW YORK, (Reuters) – U.S. crude oil prices rose faster than U.S. gasoline prices over the past month as America has exported more refined products to Europe in response to Russia’s invasion.

Traders claim that world fuel stocks are not expected to rise quickly, as large producers such as OPEC slow down their growth. They say the tightening of fuel markets is alarming because it indicates that refiners have difficulty meeting demand, even though more crude oil becomes available via large reserve releases.

Aaron Milford (CEO of Magellan Midstream Partners (NYSE:) Partners), stated that “things are tight with diesel” during an earnings call Thursday.

The demand for crude oil, gasoline and other fuels has significantly increased, resulting in a decrease in global stocks. The invasion of Ukraine and the subsequent US sanctions against Russia by the United States (and its allies) further tightened supplies.

Washington released millions of barrels of U.S. strategic reserve oil, which helped to control crude’s price. However, inventories are falling.

Refinitiv Eikon data indicates that futures prices rose nearly 17% after the Ukrainian invasion on February 24, while U.S. fuel futures have surged over 30% and U.S futures, which are proxies for diesel, gained almost 40%.

“Geographically, crude is the leader at this time, but here, it’s much higher than average. This is a signal that the product market wants to tell refiners to get to work. Phil Flynn, senior analyst, Price Futures Group.

According to the U.S. Energy Information Administration, inventories are especially tight for distillates, which is at 105 millions barrels. This figure represents the lowest level since April 2008. U.S. crude stockpiles are higher than they were in February, due to U.S. releases.

In the last four weeks, U.S. refine product exports averaged 6.3 Million barrels per daily (bpd), which is nearly the highest export rate in U.S. History.

U.S. crude prices rose only because of concerns over energy demand as a result of China’s long COVID-19 lockdown.

U.S. crude oil discount to the global benchmark narrowed last week to minus-2.15 per barrel. This is the smallest reduction since November before expanding again. A narrower discount makes U.S. crude less appealing on foreign markets.

Traders believe that lower refining capacities, especially on the East Coast have tightened product markets, which has raised premiums for jet fuel and diesel. East Coast distillate inventories have fallen to a new record.

Robert Yawger is executive director for energy futures at Mizuho. “We don’t have enough capacity (to export more), while still not impacting the domestic markets,” Yawger said. Although we have improved some refinery utilization, most of the increase in exports is heading to Europe and not New Jersey.

U.S. fuel price gains outpace U.S. crude gains https://fingfx.thomsonreuters.com/gfx/ce/klvykloqwvg/Pasted%20image%201651783964890.png