Brent Crude Price Drop Hides Tightening Diesel Supply Risk

The price of Brent crude oil has pulled back sharply, but this decline masks a growing risk in diesel supply. Record levels of crude floating storage have contributed to the drop, with U.S. Strategic Petroleum Reserve (SPR) stocks falling to 311.4 million barrels. However, refined-product supply is much tighter, with diesel cracks near $81 per barrel versus a five-year norm of around $25.

Hormuz product exports have plummeted from about 4.5 million barrels per day to just 500,000, while Russian refinery outages and possible Chinese export curbs increase the risk of winter diesel shortages. This combination of factors poses significant challenges for refineries and consumers alike.