DTN Oil Update
ULSD Crack Surpasses $100/bbl as Supply Tightens
HOUSTON (DTN) -- Oil futures prices climbed for a third consecutive trading session Tuesday marking a three-week high amid a global supply crunch fueled by disruptions to vessel traffic through the Strait of Hormuz, ongoing conflict in the Middle East and the resulting closure of the strategic waterway.
The ULSD crack -- the price difference between a barrel of the most actively traded NYMEX ULSD and WTI contracts -- surpassed the $100 bbl mark for the first time in history, settling at $102.86 bbl. ULSD rose to the highest since early April on reports of new Iranian strikes on tankers and Houthi attacks on Saudi refineries. Prices were under upward pressure after both Washington and Tehran ruled out extending the 60-day ceasefire period that officially expired Monday, Aug. 17.
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The ULSD-WTI differential stood at just $42.01 on Feb. 27, the final trading day before the start of the U.S.-Israeli war on Iran. Last month, the spread surpassed the previous record high $86.82 bbl reached in October 2022 when the European Union agreed to ban refined fuel imports from Russia, which has until then served as the bloc's primary diesel supplier.
The effective closure of the Strait of Hormuz, combined with ongoing refinery attacks across the Persian Gulf, has squeezed global diesel supplies since early March. Beyond the direct loss of nearly 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.
Additionally, 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.
On the crude side, U.S. stockpiles, which have dwindled rapidly amid the largest oil supply disruption in history, posted a surprise increase during 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.
The front-month NYMEX WTI futures contract rose $0.47 to settle at $84.97, while ICE Brent for October delivery rose $0.11 to $90.98 bbl.
Downstream, NYMEX ULSD futures for September delivery rose $0.0191 to $4.4562 gallon. Front-month RBOB futures, meanwhile, increased $0.0370 to $3.3071 gallon.
The U.S. Dollar Index inched up 0.016 points to 99.55 against a basket of foreign currencies.