Refined Fuels Spark Oil Market Crunch Despite Crude Price Slump

Oil prices have dropped to a two-month low following the de-escalation of tensions in the US-Iran conflict, but the market is still gripped by tightness in refined product supply.

The refining margin for gasoline and diesel has reached record highs, exceeding $60 per barrel in Europe due to Russia's ban on diesel exports and dwindling global fuel inventories.

In the US, the prompt NYMEX 3-2-1 crack spread contract, a proxy for refinery profitability, hit an all-time high of $64 in mid-July, while U.S. commercial oil stocks remain 6% below their five-year average.

Experts warn that tight fuel markets could lead to higher inflation and economic strain globally, as diesel is essential for agricultural and road freight activities.