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Yahoo
2 days ago
- Business
- Yahoo
Diesel and crude spike higher on Israel attack, though no Iranian oil facilities impacted
Oil futures prices soared Friday on the back of Israel's attack on Iran, but there were no indications any oil-related facilities had been impacted by the multi-pronged offensive by the Israeli military. 'Non-nuclear energy infrastructure has not been expressly threatened by any party thus far,' S&P Global Commodity Insights (SPGCI) (NYSE: SPGI) said in a 'factbox' summary of key energy-related developments stemming from the Israeli attack. Ultra low sulfur diesel (ULSD) on the CME commodity exchange settled at $2.3587/gallon, an increase of exactly 17 cts/g or 7.77%.Friday's ULSD settlement is the highest since February 27. The one-day increase of 17 cts/g is the highest since Jan. 10. The last time ULSD increased as much as December 2022, when it rose more than 18 cts/g. But the gain that day was 5.97%; today's was 7.77%. The higher ULSD levels followed increases in global crude markets, which at first tend to rise or fall more in percentage terms than products like gasoline or diesel in reaction to real or potential disruptions in oil supply or demand. But that did not occur Friday, with ULSD rising more than the two key crude benchmarks in percentage terms. Brent, the global crude benchmark, rose $4.87/barrel on the CME, an increase of 7.02% to settle at $74.23/b. West Texas Intermediate, the U.S. crude benchmark, climbed $4.94/b to $72.98/b. That marked a percentage gain of 7.26%.What's at stake through any widening of the war to include Iranian capacity to produce crude was spelled out by SPGCI in its factbox. The SPGCI segment, which houses the legacy Platts business, said Iran produced about 3.25 million b/d of crude in May. Of the countries in the OPEC+ group of oil exporters, only Saudi Arabia, Russia and Iraq produced more. The U.S. is the world's largest crude producer with output of about 13.24 million b/d, according to the latest report by the Energy Information Administration. But since the Iranian Revolution in 1979 and the takeover by its Islamic leaders–and its breach with most other Arab oil producers–the nightmare scenario for oil consumers has always been that Iran would take steps to close the Strait of Hormuz, which is the entrance to the Persian Gulf. Some portion of oil exports from Saudi Arabia, Kuwait, the United Arab Emirates, Iraq and Iran all pass through the Strait of Hormuz. But despite those fears that have now been in place for more than 45 years, a closure has never happened. Several analysts Friday said it was not likely to happen this time either. The Strait of Hormuz is 'obviously the major concern,' Paul Sankey of independent research firm Sankey Research said in an interview with CNBC. But he added that if Iran took steps to close the passage, 'all hell will break loose. I'm sure Donald Trump is going to be at the forefront of that unleashing of hell.' But Sankey was not fully downplaying the impact from the Israeli attacks. He said the 'speed of the move we've seen is actually as fast as we saw during the Russian invasion of Ukraine. ' 'Recently the oil market hasn't been characterized by reacting to geopolitical risk as much as you would think,' he said. 'On this occasion, we're doing a Russia-Ukraine reaction. So you have to ask yourself, why is that?' Sankey said if there is a loss of output from Iran, it will be difficult to turn to the U.S. Strategic Petroleum Reserve to fill the gap. Reserves were drawn down by the Biden administration to compensate for the loss–real and anticipated–of Russian oil following its invasion of Ukraine in other option to fill any gap, Sankey said, is spare capacity in several Middle East countries; Saudi Arabia, Kuwait, the United Arab Emirates and Iraq. But the problem with that spare capacity is that much of it is behind the Strait of Hormuz. 'I think the market is pricing real fear about spare capacity,' Sankey said. 'That's why the move has been so aggressive.' Richard Joswick, the head of near-term oil analysts at SPGCI, said 'the key is whether oil exports will be affected.' He noted that when Iran and Israel went back and forth with attacks last year, oil prices did move higher at first. The higher levels didn't stick for long once it became clear that the attacks had no impact on supply. But the SPGCI report also quoted J.P. Morgan analysts who said the 'worst case-scenario' of lost output would be a decline of Iranian supplies of 2.1 million b/d. That could spike the price of dated Brent–the physical benchmark that is drawn from the market for several different crudes–to $120 to $130/b. Retail prices take time to react to moves big and small in futures prices, though wholesale prices will be expected to move on the same day to reflect higher futures prices. Pilot Flying J makes its retail pump prices available through a downloadable spreadsheet. As of 2 p.m. Friday, there was no indication of a surge in retail diesel prices as a result of the Israeli attack; any increases were small and of an amount that would be considered part of the normal day-to-day fluctuation. That lack of movement is not surprising given that the attack just happened. When disruptions to physical supplies occur, like with a hurricane or pipeline outage, price spikes can be more rapid. That has not happened yet. Patrick DeHaan, the head of petroleum analysis at GasBuddy, which tracks retail prices, said in a post on X that diesel could rise between 10-30 cts/g over the next two weeks. More articles by John Kingston Onstage in Chicago, CHRW talks tech and staffing; RXO sees language order hitting capacity Logistics GDP share rose in '24, not likely to drop: CSCMP report Trump signs bill killing California ZEV-related waivers, state immediately files lawsuit The post Diesel and crude spike higher on Israel attack, though no Iranian oil facilities impacted appeared first on FreightWaves.
Yahoo
06-05-2025
- Business
- Yahoo
Benchmark diesel price falls fourth straight week amid price war fears
The benchmark diesel price used as the basis for most fuel surcharges fell Monday for the fourth consecutive week, as global oil markets are eyeing the possibility of a market share war that could overwhelm buyers with supplies looking for a home. The Department of Energy/Energy Information Administration price of $3.497 a gallon, down 1.7 cents, is at its lowest level since just before Christmas 2024. Four weeks of declines have dropped the price by 14.2 cents during that period. The DOE/EIA price is now released on Tuesdays, but its effective date is Monday, one day earlier. The latest decline in the DOE/EIA benchmark number comes as the price of ultra low sulfur diesel on the CME commodity exchange has declined significantly in the past week. A settlement Monday of $1.9598 was the lowest since May 20, 2021, and marked a decline of 15.25 cents per gallon in just six trading days. However, some of that decline could also be attributed to the expiration of the May contract on April 30 and the June contract becoming the front month the following day. The market structure known as 'backwardation' has prices for future delivery at a level less than current prices. But what is known as the rollover only accounted for a few cents of the decline in those six days. Prices rose Tuesday. At approximately 11:30 a.m., ULSD on CME was up 5.42 cents a gallon to $2.0287. But the biggest story in oil markets in the past week is clearly bearish. It is the decision by the OPEC+ group, and Saudi Arabia in particular, to go ahead with putting more production on to a market that has seen the global crude benchmark grade, Brent, decline to just more than $60 a barrel after being solidly above $70 as recently as early April. As S&P Global Commodity Insights reported, the countries that are in the OPEC+ group that had voluntary production cuts in place agreed over the weekend to increase their individual quotas in June more than they had planned, 'the second month in a row that they will accelerate easing their combined 2.2 million b/d of cuts,' SPGCI said in its reporting. OPEC+ is a group of oil-exporting countries consisting of OPEC and several non-OPEC oil exporters nominally led by Russia. According to SPGCI, the OPEC communique on its decision cited 'current healthy market fundamentals' as a reason for its increased output. It added that estimates of global inventories suggest they are tight for this time of year by historic standards. According to SPGCI, the increase out of the eight countries that agreed to a quota increase is 411,000 barrels a day, effective in June. With increases on the market from April and May, according to a report from Reuters, higher supplies are now 960,000 barrels per day out of a total cut of 2.2 million. This report from Axios reflects a prevailing view among oil market observers: Saudi Arabia is determined to curry favor with President Donald Trump, and helping to push down oil prices can accomplish that goal even if that hurts its own finances. But this report in The New York Times, quoting an analyst from the Energy Aspects research firm, gave another reason: The Saudis have reached the end of their patience with other nations in OPEC+ that are not observing their quota. A fight for market share will always benefit the kingdom and its lower costs of production. Trump is scheduled to visit Saudi Arabia next week. 'The view from Saudi Arabia, in particular, is that they no longer want to be the ones carrying the heaviest burden if other countries in the group are not showing sufficient commitment to doing their part,' Richard Bronze, the head of geopolitics at Energy Aspects, said in the Times article. More articles by John Kingston Werner CEO Leathers confronts losses, outlines plans to bounce back 2 more charged in death of Louisiana staged truck accident witness New decline on weak earnings delivers fresh pain to Wabash stock The post Benchmark diesel price falls fourth straight week amid price war fears appeared first on FreightWaves.
