If you've been scratching your head over why oil prices keep climbing even after OPEC+ just agreed to pump more crude, you're not alone. The answer, according to GasBuddy analyst Patrick De Haan, isn't about how much oil is coming out of the ground — it's about what happens to it once it gets there.
In a series of posts on X on Monday, De Haan laid out the case that the world's refineries are the new bottleneck. "Expect refineries — the middleman to the oil/refined product price relationship — to be extensively discussed with suddenly too little global refining capacity," he said.
He was responding to a post by user Ellen R. Wald, who noted that without refining capacity, crude oil is "just some sludge" underground. Her comments came as Saudi Arabia slashed prices of its flagship Arab Light crude for Asia by $11 per barrel — a move that would normally signal weaker demand, but the market is focused elsewhere.
The Organization of the Petroleum Exporting Countries plus (OPEC+) announced on Sunday that it would increase oil supply by over 188,000 barrels per day, with representatives from Saudi Arabia, Russia, Iraq, Kuwait, Oman and more approving the adjustment during virtual talks. But that extra crude needs somewhere to go, and refineries are already running near capacity.
De Haan noted that wholesale gas and diesel prices rose up to 12 cents per gallon on Monday. "While the price of oil may suggest plentiful supplies, it's now on the finite amount of global refinery capacity that's heavily weighing on prices," he explained.
The numbers back him up. West Texas Intermediate (WTI) crude rose 1.18% to $69.36 per barrel, while Brent crude climbed 1.21% to $72.86 per barrel at the time of writing.
Meanwhile, the U.S. Strategic Petroleum Reserve (SPR) continues to shrink. De Haan reported that the SPR fell by another 6.2 million barrels in the past week, bringing it to 319.5 million barrels — "the lowest level since May, 1983." Over the past year, the reserve has dropped by nearly 83 million barrels.
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