The second quarter of 2004 saw oil prices forging upwards in April and May, before peaking in early June, and then softening following the OPEC meeting in Beirut. WTI bench marker crude oil broke through the USD42/bbl (barrel) ceiling (over USD270/tonne) in early June, but it fell markedly by just over USD6/bbl (USD39/tonne) by the end of that month. Crude prices increased by 24% during April and May, but bunker prices rose only 15% over the same period. The relative weakness of bunker fuel prices was due to the lack of demand in Asia and the continuing strength of supply in Europe. The volatility and strength in crude oil prices were driven by three key factors: the threat of supply disruptions; the increased oil demand for a growing global economy; and the need to keep the US well supplied with oil products, particularly gasoline, during its summer car driving season, which lasts from the end of May to early September. The US consumes some 40% of the world's production of gasoline, which is so high because it has insufficient refining capacity to meet demand. No new refinery has been built in the US for over 25 years. Europe supplies one-third of those gasoline imports. Europe's refineries have been running at capacity in order to assuage the thirst of the US, and a good supply of byproduct fuel oil has been the result. Combined with the steady flood of fuel oil coming out of Russia through the Baltic and Black Sea regions, bunker prices have been insulated against the volatility and strength of the crude market.
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