Shell reports record $42-a-barrel refining margin as war keeps fuel markets tight
Shell told investors it earned a $42-a-barrel refining margin in the third quarter, up from $24 in the second and above its previous high in 2022. Refiners are making unusually large money turning crude into fuel right now, and that spread gets paid by the people buying diesel and gasoline downstream. If you are a jobber watching your rack cost and wondering why it won't come down, the crack is most of your answer.
Crude down, diesel flat
EIA put commercial crude stocks down 3.2 million barrels for the week ending October 2, at 424.1 million barrels. That is still 1% above the five-year average for this time of year, so the draw matters less than the headline suggests. Distillates held steady, which is the number that counts for haulers and heating customers heading into the cold months. API had posted a crude draw the day before, so the direction was already set.
Brent back over $100
Brent rose 1.3% to $101.88 on renewed attacks in the Middle East. That is about $55 more than a barrel cost this time last year. Crude at that level sitting on top of fat refining margins is why pump and rack prices are where they are, and why the heating oil complaints are getting loud. Senator Warren tied $500 heating oil bills to the Iran war. The refiners she is angry at have watched their stocks climb more than 160%, which tells you where the margin went.
The 100-million-barrel release
The IEA's Governing Board met informally Wednesday to work out a planned release of 100 million barrels of oil and diesel from stocks, meant to ease the supply crunch, according to EU diplomats cited by Reuters. EU nations had hashed out the oil piece earlier that day. A release that size, if it actually lands, could pull some air out of refining margins and take the edge off diesel. Nothing is confirmed yet on timing or volume, so treat it as a plan, not supply.
What to watch
Watch whether the IEA release gets real numbers and a date attached, and how much of it is diesel rather than crude. Distillate stocks need to hold through the first cold weeks or the heating oil story gets worse. And watch whether the Middle East attacks keep Brent above $100 or let it ease back. Russia is now floating WWI-era barrage balloons over its refineries to fend off Ukrainian drones, so the supply side of this stays unsettled either way.