DTN Oil Update

Karim Bastati
DTN Analyst

VIENNA (DTN) -- Oil prices rose for a third consecutive trading day Tuesday morning, holding at their highest in nearly three weeks on dimming peace prospects and mounting supply disruptions. Fresh attacks on tankers and refineries, meanwhile, catapulted U.S. diesel margins to record highs.

By 8:45 a.m. EDT, ICE Brent for October delivery rose $0.35 to $91.22 bbl, and NYMEX WTI for September delivery advanced $0.76 to $85.26 bbl.

Downstream, NYMEX ULSD futures for September delivery slightly retreated from Monday's four-and-a-half-month high, inching down $0.0118 to $4.4253 gallon. Front-month RBOB futures, meanwhile, added $0.0320 to $3.3021 gallon.

The U.S. Dollar Index steadied, up 0.021 points to 99.555 against a basket of foreign currencies.

The ULSD crack -- the price difference between a barrel of the most actively traded NYMEX ULSD and WTI contracts -- on Monday breached the $100 bbl mark for the first time in history, settling at $101.86 bbl as ULSD soared to the highest since early April on reports of new Iranian attacks on tankers and Houthi attacks on Saudi refineries. Washington and Tehran dismissing the option of extending the 60-day ceasefire period which expired Monday also supported prices.

On Feb. 27, the last trading day before the start of the U.S.-Israeli war on Iran, the differential was $42.01. Last month, the ULSD crack versus WTI surpassed the previous record high $86.82 bbl reached in October 2022 after the European Union agreed to ban refined fuel imports from Russia, back then the economic bloc's primary diesel supplier.

The de-facto closure of the Strait of Hormuz and attacks on refineries in the Persian Gulf have since early March considerably tightened global diesel supply. Aside from the direct loss of around 4 million bpd of middle distillate exports, the market had to contend with a still ongoing crude-shortage-induced refining lull affecting most of Asia. At the same time, Ukraine has been stepping up its attacks on Russian energy infrastructure, taking offline around a third of refining capacity, which subsequently led to refined product export bans and fuel shortages, further tightening the screws on the global diesel market.

U.S. crude stockpiles, meanwhile, which have dwindled rapidly amid the largest oil supply disruption in history, unexpectedly rose in the first week of August amid a surge of imports, the U.S. Energy Information Administration (EIA) reported last Wednesday. Weekly inventory estimates by the American Petroleum Institute are scheduled for release later Tuesday, followed by EIA data on Wednesday, Aug. 19.