Oil Has Biggest Weekly Rise in 5 Months on Gulf Escalation


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Crude futures posted on Friday (7/17) 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 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.

   It was the largest weekly gain for the U.S. crude benchmark since the week 
ended February 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 that 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.




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