Oil Rises, ULSD Crack Tops $100/BBL on Tightening Supply


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices rose for a third consecutive trading day Tuesday 
(8/18) 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 08:45am ET, 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 yesterday'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 US 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 February 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 today, followed by EIA data 
on Wednesday (8/19).




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