Geopolitical Risks and Diesel Strength Keep Oil Market Firm

Key Moments

Geopolitical Tensions Sustain Risk Premium in Crude

ING strategists Ewa Manthey and Warren Patterson report that oil prices have climbed for a fourth consecutive session, with gains driven primarily by heightened tensions between the United States and Iran and growing worries about shipping risks through the Strait of Hormuz. These geopolitical developments are feeding directly into higher risk premiums across the crude complex.

According to the strategists, uncertainty surrounding any diplomatic progress continues to underpin prices. As they note,
“Oil prices extended gains for a fourth consecutive session on Wednesday as uncertainty over a resolution to the US-Iran conflict continued to support risk premiums. US President Donald Trump reiterated that no talks were underway with Tehran and signalled that additional sanctions could be announced this week.”

Market participants are also monitoring shipping activity through a key transit route. As highlighted in the commentary,
“Reports of reduced vessel traffic through the Strait of Hormuz have also raised concerns over potential oil supply disruptions.”

Inventory Data Offers Additional Support

Beyond geopolitics, the physical balance of the market has contributed to the constructive tone. The strategists point to a slightly supportive inventory backdrop in the United States, citing the latest figures from the American Petroleum Institute (API).

“The oil market also drew support from a slightly bullish API inventory report. US crude inventories fell by 328k barrels last week, compared with market expectations for a 74k-barrel draw. Stocks at the WTI delivery hub in Cushing declined by 1.4m barrels.”

Product stock changes were mixed across the barrel. As ING notes,
“Product inventories were mixed, with gasoline stocks rising by 1.1m barrels while distillate inventories fell by 2.8m barrels. The more closely watched EIA inventory report is due later today.”

Record Diesel Cracks Highlight Tight Refined Product Market

Manthey and Patterson emphasize that refined product dynamics, particularly in diesel, are adding another layer of support to the complex. They highlight that
“US diesel crack spreads climbed above $100/bbl yesterday, reaching a record high as global refining constraints and supply disruptions tightened the market. Diesel cracks have more than doubled since the start of the US-Iran conflict and are up more than 20% month-to-date.”

These elevated margins reflect a combination of constrained refining capacity and disruption-related supply issues. The strategists point to the impact of Russian export curbs and infrastructure outages in other regions on diesel availability.

“Export restrictions from Russia, following repeated Ukrainian drone attacks on refineries, have reduced diesel availability, while disruptions affecting energy infrastructure elsewhere have added to concerns over supply and helped support prices.”

Short-Term Outlook Shaped by Risk and Supply Constraints

In summary, ING’s analysis indicates that the interplay of geopolitical risk premiums, tighter-than-expected US crude and distillate inventories, and exceptionally strong diesel crack spreads is supporting oil prices in the near term. With the more closely watched EIA inventory report still pending, the strategists suggest that both geopolitical headlines and fresh stock data remain key drivers for market direction in the short run.