Markets generally obsess over the direction of crude oil’s price. Yet the value of the black stuff only really reveals itself in the refining process. Few of us can do much with a barrel of crude. But turn that into petrol or jet fuel and then we are really going places. Transport accounts for well over half of the consumption of oil. Refining helps produce industrial chemicals as well.
As such, the relative spread between refined product prices and the value of crude oil inputs (refining margin) can indicate the health of global economic activity. The latest data point this week wasn’t exactly inspiring.
Shell’s trading update on Monday didn’t contain a vast amount to surprise energy market wonks, ahead of its full-year earnings in about three weeks’ time. Demand has been sluggish for oil.