Transport fuel demand is projected to grow by 5 million b/d between last month’s low and August, although there is significant downside risk to the forecast. While a similarly strong demand increase occurred last year, the market has less of a buffer this time around because of low product stocks, reduced spare refining capacity, and uncertainty about Russian product exports.
Gasoline is rallying as a result, just as diesel is beginning to ease from record highs. While our outlook does not have US retail gasoline prices surging to $6 or $7/gallon this summer, prices nearing $5/gallon in the near term are still at record highs.
In short, the summer will remain challenging as new refining capacity will not come online until the second half of 2022 and 2023. A rebalancing of Russian diesel trade should also help beyond the summer.