DTN Oil Update
Oil Has Biggest Weekly Rise in 5 Months on Gulf Escalation
SECAUCUS, N.J. (DTN) -- Crude futures posted on Friday their largest weekly advance since the end of February as U.S.-Iran tensions revisited this week the peaks of the Middle East conflict, now approaching its fifth month.
NYMEX WTI crude for August delivery settled up $3.54 at $82.49 barrel (bbl), rising 4.5% on the day and 15.5% on the week, amid reports that Tehran has directed Yemen's Houthi movement to prepare for a potential closure of the Bab el-Mandeb strait in the Red Sea.
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It was the largest weekly gain for the U.S. crude benchmark since the week ended Feb. 27, which marked the start of the conflict. Any blockade of the Bab el-Mandeb will add to the already severely restricted oil shipments on the Strait of Hormuz, where some 20% of the world's oil supply used to transit before the war.
Daily commercial transits through Hormuz dropped into single digits by Friday afternoon, with maritime tracking data showing tankers halting or reversing course following the reimposition of the U.S. naval embargo on Iran and continuous drone and missile strikes.
WTI aside, ICE Brent for September delivery finished up $3.87 at $88.10 bbl for a 4.6% rise on the day and 16% on the week.
Downstream, NYMEX ULSD for August climbed $0.0339 to settle at $4.0646 gallon while August RBOB finished up $0.1080 at $3.3927 gallon.
The rally in refined products came as the disruption in Middle East shipments clamped down on oil processing, sending refining margins to historic highs. The benchmark domestic 3:2:1 crack spread versus WTI reached a record $70.52 bbl, underscoring the severe operational strain across the global refining system.
Industry analysts also noted product markets were reacting more aggressively than crude as the conflict particularly impacted shipment of specialized blending components as well as regional fuel exports.
U.S. supply cushions offer little near-term relief. The Energy Information Administration reported this week that nationwide road fuel inventories have drained to their lowest seasonal levels in nearly a decade.
Gasoline stockpiles are currently tracking 10% below their five-year historical average. With commercial shipping companies avoiding Persian Gulf loadings and multi-week logistics backlogs mounting, energy markets are increasingly pricing in a prolonged structural fuel crunch extending through the remainder of the summer driving season.