Key Moments
- Brent crude moved back above $95/bbl, its highest level in more than a month, as Persian Gulf tensions intensified and added a geopolitical risk premium.
- Diesel markets tightened further, with ICE gasoil cracks at around $79/bbl, U.S. diesel cracks well above $100/bbl, and ICE gasoil Sep/Nov timespreads at a backwardation of $80/t.
- API data showed a 2.6m-barrel draw in U.S. crude inventories, while distillate stocks fell by 300k barrels, reinforcing concerns over already tight middle distillate supply.
Brent Strengthens on Heightened Geopolitical Risk
ING analysts Warren Patterson and Ewa Manthey report that Brent crude has climbed back above $95/bbl, reaching its strongest level in more than a month as supply fears linked to the Persian Gulf resurface.
“Brent pushed back above $95/bbl, reaching its highest level in more than a month, as Persian Gulf tensions escalated further. After weekend strikes, Iran hit two oil tankers in the region yesterday. The US, meanwhile, carried out additional overnight strikes on Iranian targets, adding fresh geopolitical risk premium to the market.”
Strait of Hormuz Flows Under Scrutiny
The analysts emphasize that recent events have brought potential threats to regional crude and product flows back into focus.
“Developments in recent days brought risks to regional oil supplies back into focus. We’ve seen oil flow through the Strait of Hormuz despite the stalemate between the US and Iran, but rising tensions clearly put crossings at risk. The US energy secretary said 17m barrels of oil flowed through the strait on Monday, the highest volume since the conflict began.”
Diesel Market Tightness and Record Cracks
According to ING, refined product balances, particularly in middle distillates, remain constrained, reflected in exceptional strength in diesel cracks and timespreads.
“Escalation in the Middle East also dashes any hope for a recovery in refined product flows, leaving markets tight. This is mostly reflected in the diesel market, where the ICE gasoil crack traded to record highs yesterday of around $79/bbl, while the diesel crack in the US is trading well above $100/bbl. Timespreads reflect this acute tightness, with the ICE gasoil Sep/Nov spread trading at a backwardation of $80/t.”
| Market Indicator | Latest Level |
|---|---|
| Brent crude price | Above $95/bbl |
| ICE gasoil crack | Around $79/bbl |
| U.S. diesel crack | Well above $100/bbl |
| ICE gasoil Sep/Nov spread | $80/t backwardation |
Outlook for Middle Distillate Cracks
ING sees limited relief ahead for the middle distillate complex, given ongoing export disruptions and constrained refining capacity.
“Given disruptions to Middle East and Russian diesel exports, and with little sign of an imminent recovery, middle distillate cracks are likely to remain highly elevated and volatile, particularly as we move towards seasonally stronger demand. The global refining system has little slack to make up for the disruptions we are currently seeing.”
U.S. Inventory Moves Reinforce Distillate Concerns
Recent U.S. inventory data signal further tightening in crude and distillates, even as gasoline stocks edge higher.
“The latest API numbers show US crude oil inventories fell by 2.6m barrels over the last week. The picture was more mixed for refined products, with gasoline inventories up 300k barrels while distillate stocks fell by 300k barrels. The move in distillate stocks will do little to help ease tightness concerns.”
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