Brent crude is heading for a nearly 5% weekly gain as stalled US-Iran talks and tight fuel supplies keep prices elevated. The real strain, though, is showing up in diesel: the IEA now sees a widening supply deficit, and Jefferies says refined-product markets, not crude itself, carry the squeeze.
Brent crude held near $90 a barrel before fading to around $87 early Thursday morning, with traders awaiting progress toward reopening the Strait of Hormuz. Stalled US-Iran negotiations and tightening global fuel supplies are keeping prices supported, but the sharper squeeze is showing up in diesel, not crude oil itself.
The Trump administration is maintaining its blockade of Iranian ports as Tehran demands compensation for war-related damage, and Pakistan, which has mediated the talks, said the broader peace process had stalled this week. Late Wednesday, President Trump wrote in a Truth Social post that the US has total control of the Strait of Hormuz and that he thinks the US will keep it. As a result, Brent is on track for a weekly advance of nearly 5% as Ukrainian and Russian strikes on energy infrastructure tighten both oil and diesel markets.
Diesel cracks flash the real squeeze
The International Energy Agency said Wednesday it now expects a 1.8 million-barrel-a-day deficit this quarter, more than double its previous estimate, and warned that elevated prices are starting to crush demand while projecting the widest annual supply shortfall in five years. Samantha Dart, co-head of global commodities research at Goldman Sachs, said on Bloomberg TV that the diesel-supply crunch is "what keeps her up at night". Saxo Markets strategist Charu Chanana said volatility will stay elevated until Hormuz reopens and the production outlook grows clearer.
Crude builds even as cracks stay tight
Jefferies analyst Sam Burwell wrote in a note Wednesday that diesel cracks sit far above their prior all-time highs while crude itself remains well off its own highs, calling the setup constructive for crude given how tight refined-product markets have become. He added that US refinery utilization dipped week over week but remains near a 20-year seasonal high.
Offsetting some of the price pressure, US crude stockpiles surged by 17.4 million barrels last week, the largest increase since January 2023, as exports weakened and imports from Saudi Arabia and Venezuela increased.
Bank of America's commodities team said the diesel market looks set to stay tight, volatile and expensive well into next year. Unless the Strait of Hormuz reopens soon and fuel supplies recover meaningfully, the focus will stay on refined-product markets, particularly diesel.
Source: Oilprice.com
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