DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied 4% on Friday in volatile trading. The gains came as lower liquidity exacerbates price moves, while a global squeeze for refined products intensified with Russian diesel exports falling sharply ahead of Sunday's May 15 deadline for Western trading houses to phase out all financial transactions with Russian refiners, pushing ULSD futures higher.

Diesel exports from Russia dropped in April from their pre-war level, according to private data, as oil buyers seek to limit exports from one of the world's biggest suppliers. Meanwhile, investors are keeping a close eye on China as authorities in Beijing denied rumors that the city would go into lockdown even as new COVID-19 cases climbed.

Shrinking U.S. fuel stockpiles ahead of the summer driving season are signaling little relief for consumers, while the International Energy Agency on Thursday said that there's an "almost universal product shortage" globally.

Gasoline futures in the United States are trading $55 per barrel (bbl) above crude, the widest gap on record. Retail prices of both gasoline and diesel also climbed to a fresh record, AAA data showed Friday.

Friday also saw U.S. gasoline futures settle at a fresh record-high $3.9578 per gallon, signaling more pain at the pump is likely on the way for American drivers while feeding inflation concerns in the world's largest economy. U.S. Consumer Sentiment fell again in early May, reversing the rebound seen in April, as both the assessment of the current state of the economy and short-term expectations deteriorated amid decades high inflation.

The preliminary estimate of the consumer sentiment index published Friday by the University of Michigan decreased to an 11-year low 59.1 in May from 65.2 in April, missing the 64.1 consensus forecast from economists. The deterioration in consumer sentiment reverses the improvement registered in April, which came after three consecutive months of eroding sentiment as inflation has soured the mood of consumers over the last year.

Further supporting the oil complex, gas shipments from Russia were disrupted after Gazprom sanctioned the owner of the Polish part of the Yamal-Europe pipeline that is the key alternative route for the Druzhba pipeline that runs across Ukraine. The ban means Gazprom PJSC cannot use that conduit anymore, the company said in a statement released this morning. Russia also sanctioned and halted sales to Gazprom Germania GmbH and its units, which are now under the control of the German energy regulator, including supplier Wingas GmbH and London-based Gazprom Marketing and Trading Ltd. The move could also upend LNG markets, heightening fears over gas supplies in Europe.

European natural gas prices surged 14% this week after flows from Russia via Ukraine fell further on Thursday following interruptions at a cross-border entry point because of the war. The developments add to market concerns, as Moscow retaliates against Europe's penalties with a slew of its own curbs targeting some gas companies in the region.

The latest development comes after IEA sharply downgraded its growth projections for global demand this year to a mere 490,000 barrels per day (bpd) in the second half of the year from a 4.4 million bpd growth rate seen over the January-March period. For comparison, the Organization of the Petroleum Exporting Countries expects demand growth of 2.8 million bpd in the second quarter compared with 5.2 million bpd over the first three months of the year. According to OPEC, worldwide oil consumption will average 100.3 million bpd this year, which is 900,000 bpd higher than the IEA's assessment.

On the session, NYMEX June West Texas Intermediate rallied $4.36 per bbl to $110.49 per bbl, and Brent crude settled advanced to $111.55 per bbl, up $4.10 per bbl. NYMEX June RBOB futures settled up 16.61 cents at a $3.9578-per-gallon fresh record high on the spot continuous chart, while June ULSD futures gained 0.51 cent to $3.9212 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges can be reached at liubov.georges@dtn.com