Crude Oil Surges Amid Diesel Shortage and Strait of Hormuz Tensions
The global oil market is experiencing a unique situation where crude oil supplies are abundant, but diesel and distillate stocks are severely low. Crude oil prices have risen to just under $91.00 after adding 1.6% on Monday, with the market focusing on supply disruptions rather than production levels.
The recent tensions in the Strait of Hormuz between Iran and the US have raised concerns about oil shipments, leading to a risk premium that is driving up prices. However, OPEC+ has decided not to increase output, which has contributed to the price rise.
US commercial crude oil inventories are at 1% above their five-year average, while distillate stocks, which cover diesel and heating fuel, are at a 14% deficit. The Energy Information Administration (EIA) reports that distillate stocks have reached the lowest seasonal level in its record and the lowest for any August since 1951.
The New York Harbor diesel crack against the barrel has reached $107 on September 1, and retail diesel prices have printed an all-time high of $5.85 a gallon on September 4. This situation is more indicative of a refining shortage rather than a supply issue.