DTN Oil Update
ULSD Futures Soar to 3-Year Highs as Iran War Drags
VIENNA (DTN) -- Diesel prices soared to more than three-year highs Thursday morning on the back of a rally in European gasoil futures as more refiners in Asia were forced to scale back operations and cancel product exports as the Iran war hit crude deliveries from the Middle East.
NYMEX ULSD futures' front month, April, peaked at $3.5755 gallon, the highest since the $3.5800 level it touched in January 2023. ICE gasoil for March soared to $1,130.25 tonne, the highest since October 2022.
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The rally in both came as tanker traffic through the Strait of Hormuz remained at a virtual standstill on the sixth day of a widening U.S.-Israeli conflict with Iran, cutting off some 5 million bpd of refined product supply.
The Middle East has become a vital supplier of diesel to Europe after the European Union banned refined product imports from Russia in February 2023, a year after Moscow invaded Ukraine.
Several refiners in Asia who are heavily dependent on Middle Eastern crude oil, meanwhile, have started to reduce crude throughput and cancel exports amid a lack of crude deliveries from the Persian Gulf, where some 14 million bpd of crude oil supply remained stranded.
The 300,000-bpd capacity Mangalore refinery in India on Wednesday told clients it may not be able to fulfill export obligations, and the Chinese government advised major refineries to suspend product exports. Refiners in Indonesia and Japan have also started to cut runs, and refiners in Thailand were told to halt fuel exports.
An escalating war added to supply risks. Iranian drones and missiles struck several U.S.-allied countries in the region over the week, dragging them into the conflict. On Wednesday, U.S. and Israeli officials said Kurdish militias from northern Iraq have started a ground offensive, although that claim was denied by both the semi-autonomous Kurdish government and Iranian state media. Iran's Revolutionary Guard on Thursday claimed to have struck a U.S. oil tanker in the Persian Gulf.
At 8:40 a.m. EST, NYMEX WTI crude futures for April delivery were up $2.29 to trade near $76.95 bbl, and ICE Brent crude for May delivery advanced $1.89 to $83.29 bbl.
Downstream, aside from ULSD, RBOB futures for April delivery soared as well, by $0.0769 to $2.5918 gallon.
The U.S. Dollar Index strengthened by 0.245 points to 98.975 against a basket of foreign currencies.
