Crude oil prices traded just under $91.00 after rising 1.6% on Monday, marking a roughly $10 increase from the $81.00 area over nine sessions, with uninterrupted production throughout this period [1]. The focus has shifted from crude supply to refining capacity, as Saudi Aramco's Jizan refinery—a 400,000 barrel-a-day facility—was struck again on Monday, according to a Financial Times report cited in the article. The extent of the damage is still being assessed, and the company has not commented. The attack is reportedly on the same scale as a previous strike last month that briefly interrupted operations, and the same plant was also hit in July [1].
Geopolitical tensions in the Gulf have escalated, with American strikes on Iranian vessels over the weekend and Tehran preparing to declare a restricted shipping zone in the Gulf, including a new corridor through the Strait of Hormuz. The average daily crossing of commodity vessels in the latest 10-day period was about 10, the lowest rate since May, highlighting increased transit risks but not affecting crude production directly [1]. Tehran has stated that it will keep the waterway open only if attacks against it cease [1].
Inventory data reveals a divergence between crude oil and refined products. United States commercial crude oil inventories are about 1% above their five-year average, while distillate stocks (including diesel and heating fuel) are approximately 14% below their five-year average. The week ending August 21 saw distillate stocks at their lowest seasonal level in EIA records and the lowest for any August since 1951. Gasoline stocks are 17% below their own record [1]. The New York Harbor diesel crack spread reached roughly $107 on September 1, compared to the $60s and low $70s during the record week of June 2022. Retail diesel prices hit an all-time high of $5.85 per gallon on September 4. Despite crude being cheaper than in 2022, diesel prices are higher, indicating a refining shortage rather than a crude supply issue [1].
Last week's inventory report showed a crude oil stock draw of 4.45 million barrels for the week ending August 28, the first decline in five weeks and four times the expected draw. Distillate stocks increased by 0.796 million barrels, contrary to forecasts for a 1.3 million barrel drop [1]. OPEC+ left October output unchanged after six consecutive months of increases, with members still working toward new quotas. The group's spare capacity is mostly within the Gulf, meaning any additional barrels would have to transit the increasingly problematic Strait of Hormuz [1].
CONCLUSION
The combination of refinery disruptions, Gulf shipping tensions, and low distillate inventories has driven diesel prices to record highs, despite ample crude oil supply. Market sentiment is cautious, with high impact expected due to ongoing geopolitical risks and refining bottlenecks. The outlook remains uncertain as inventory imbalances and transit challenges persist.