Week in Review – Refinery Maintenance and Russian Sanctions Push Oil to Biggest Gain Since June

Crude oil markets ended the week higher, with prices up more than 4% week-over-week. The rally reflects mounting concerns stemming from the Russia-Ukraine conflict and tighter U.S. product balances heading into the fall turnaround season. With refinery utilization beginning to decline and global geopolitical risks intensifying, diesel markets remain volatile ahead of the autumn season.

WTI is hovering around $65/bbl this morning, with both WTI and Brent benchmarks on track for their largest weekly increase since mid-June. The gains come as Ukrainian drone strikes continue to target Russian refineries and export terminals, prompting Moscow to announce new restrictions on fuel shipments. Russian officials have confirmed that Russia will impose a partial ban on diesel exports through year-end, while also extending an existing gasoline export ban.

Closer to home, U.S. refinery utilization is drifting down after peaking at 96% this summer. That peak helped keep markets well supplied through the driving season, but as refiners enter scheduled fall maintenance, utilization could dip below 90%. While the market has largely priced in this seasonal decline, any prolonged or unplanned outages could lift prices beyond expectations.

U.S. refining capacity is projected to decline by roughly 3% by the end of 2025, falling to about 17.9 million barrels per day. This reduction highlights the long-term trend of consolidation and closures across the refining sector. Today, the U.S. operates just 131 active refineries, down sharply from 254 in 1982, as smaller, less efficient plants have been shuttered in favor of larger, more complex facilities. While overall capacity remains robust, the gradual loss of refining infrastructure raises concerns about the industry's ability to keep pace with shifting product demand, particularly during peak seasonal periods or unexpected disruptions.

The latest EIA data confirmed ongoing inventory draws across the barrel. Commercial crude stocks fell by 0.6 million barrels last week, leaving inventories about 4% below the five-year average. Gasoline stocks dropped 1.1 million barrels and are 2% below average, while distillate inventories declined by 1.7 million barrels, now 8% below typical levels for this time of year. With diesel inventories already tight, the question is whether refiners built enough cushion ahead of winter. Weather-driven demand will be the critical factor in determining whether markets remain balanced or tip toward shortage.

Prices in Review

Crude prices opened the week at $62.74 on Monday and traded in a relatively steady upward trend. After a slight dip to $62.33 on Tuesday, prices increased midweek, climbing to $63.64 on Wednesday and $64.80 on Thursday. By Friday, crude opened at $65.20, marking the weekly high. Overall, crude rose $2.46, or 3.92%, from Monday's open.

Diesel prices opened at $2.3022 on Monday and held relatively steady through Tuesday at $2.2943 before beginning a midweek climb. Prices rose to $2.3450 on Wednesday and continued higher to $2.3737 on Thursday. By Friday, diesel reached the weekly peak of $2.4280. Overall, diesel increased $0.1258, or 5.46%.

Gasoline prices opened at $1.9700 on Monday and edged slightly higher to $1.9799 on Tuesday. Midweek pressure pushed prices above the $2.00 mark, reaching $2.0072 on Wednesday and $2.0135 on Thursday. By Friday, gasoline eased marginally to $2.0070, but still closed the week higher. Overall, gasoline gained $0.0370, or 1.88%, from Monday's open.