Jeff Currie says crude oil doesn’t reflect energy market crisis

Veteran energy analyst Jeff Currie said the focus is on crude oil, while the real shock in the energy sector is beginning to emerge in the fuels consumers actually buy.

The chief strategy officer at Altis Partners said in an interview with CNBC that no one on Earth consumes crude oil except refineries, while everyone else consumes gasoline, diesel and jet fuel, and those markets appear to be in much worse shape.

He said European diesel prices are nearly twice the price of Brent crude, while historically crude oil and refined product prices were closely aligned, making crude a proxy for the broader energy market, but Currie said that relationship has now ended.

Part of the divergence stems from China cutting its refining operations, which has helped keep crude prices low but has also tightened supplies of oil products. In effect, China has shifted the supply shortage to the refining sector.

Currie also said governments have spent decades creating an illusion of abundance during supply disruptions by releasing strategic reserves and pressuring markets to lower prices. While the strategy worked in the past, he said the current disruption is different in scale and duration, as the oil-products market becomes increasingly tight.

Currie expects the imbalance between crude and refined product prices to eventually correct as refiners seek record margins and increase refining activity.