Oil Eyes Largest Wkly Gain in Months on Mideast Escalation


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil futures edged rose more than 2% Friday (7/17) morning 
amid intensifying reciprocal attacks between the U.S. and Iran, and were on 
track for the largest weekly increase since April.

   By 08:05am ET, ICE Brent for September delivery was up $1.79 to trade near 
$86.02 bbl, and NYMEX WTI for August delivery rose $1.92 to $80.87 bbl.

   Downstream, NYMEX ULSD futures for August delivery advanced $0.0773 to 
$4.1080 gallon, and front-month RBOB futures rose $0.0661 to $3.3508 gallon.

   The US dollar index inched higher by 0.041 points to 100.61 against a basket 
of foreign currencies.

   Daily tanker crossings in the Strait of Hormuz have fallen into single 
digits since the breakdown of the ceasefire last week. Iranian attacks on ships 
and the U.S. embargo on Iranian maritime trade had oil exports from the Persian 
Gulf return to a trickle after a two-and-a-half-week period of resurging 
outbound flows.

   The closure of the shipping lane is not only disrupting supply in the short 
term. Vessel tracking data showed that inbound traffic had remained at a 
snail's pace after the strait's reopening as shippers were waiting for signs 
that the truce will hold. This week's re-escalation proved their reluctance 
justified, and will likely add weeks to the supply recovery timeline once the 
Strait of Hormuz is open for good. Recently restarted oil production may have 
to be halted again, and tankers are likely to avoid loading in the Persian Gulf 
for even longer than last time.

   Since the original closure of the strait in early March, the dearth of crude 
oil flows to Asian led to the most severe global refining lull since COVID. 
Resulting low production and export bans squeezed already tight fuels supply, 
leading to falling inventories and rocketing margins for refiners. U.S. road 
fuels inventories have dropped to their seasonally lowest in almost a decade, 
with nationwide gasoline stockpiles shrinking to a 14-year seasonal low, down 
nearly 10% below year-ago levels and long-term averages, U.S. Energy 
Information Administration data showed this week.

   Behind this backdrop, the returning Middle East supply disruption, the 
slowest Chinese refining pace in six years and a slew of attacks on Russian 
refineries have over the past two weeks propelled U.S. refining margins to 
record highs. On Friday, the 3:2:1 crack spread versus WTI broke the $70/bbl 
mark for the first time, soaring 9% past the previous all-time high set during 
the first months of Russia's invasion of Ukraine.




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