November WTI crude whipsawed this week, sliding to $88.67 on Hormuz reopening hopes before rebounding to $96.78 as diesel stayed scarce. Saudi Arabia restarted its East-West pipeline while U.S. diesel hit a record $6.528 a gallon, pushing the WTI-Brent discount to its widest since May.
November WTI crude oil futures fell to $88.67 Tuesday after Kyodo News reported Iran could reopen the Strait of Hormuz within seven days if the United States eased military pressure. The contract then recovered to $96.78 Thursday as the diplomatic story ran into the same problem it had all week: no agreement, no normal tanker traffic. At 22:00 GMT Thursday, WTI traded at $94.76, down $0.71 for the week.
Saudi and Iraqi Barrels Ease the Supply Squeeze
Saudi Aramco increased shipments through Hormuz after attacks damaged its East-West Pipeline, and tanker tracking showed about 14 million barrels loaded on seven VLCCs inside the Gulf. Aramco has since restarted the pipeline itself, targeting around 4 million bpd as flows gradually rebuild, versus the roughly 5.5 million bpd it was moving before the September attack, according to Kpler. Iraq also said it could raise exports through Turkey.
But the trade remains fragile. War-risk insurance for Saudi-linked tankers loading at Yanbu has tripled to around 3% of a vessel's value, from less than 1% in early July. Reuters reported that visible vessel traffic through Hormuz remains far below pre-war levels even as producers keep exports moving through workarounds.
Diesel Shortage Widens the WTI-Brent Gap
While crude found some supply relief, diesel did not. European gasoil's premium to Brent reached a record near $95 a barrel. U.S. diesel hit a record $6.528 a gallon this week. As a result, WTI traded as much as $12.02 a barrel under Brent Thursday, its largest discount since May 6, according to LSEG data.
Talk of a U.S. diesel export ban is deepening that gap. Politico reported the White House was considering a 90-day diesel export ban, which the administration later denied, though President Trump said he backed one. Wood Mackenzie estimated a ban would force refiners to cut crude runs by more than 2 million bpd, a 12% reduction, as Gulf Coast storage fills within about a month.
Crude Builds While Distillates Keep Draining
The EIA reported that U.S. commercial crude inventories rose 3 million barrels to 426.4 million barrels in the week ended September 18, against expectations for a draw. Distillate inventories, however, fell 428,000 barrels to 107.4 million barrels, with the draw arriving even as diesel and gasoil premiums sat at extreme levels.
The Strategic Petroleum Reserve has fallen toward 285 million barrels, leaving less cushion behind the commercial system.
Sources: OilPrice.com, OilPrice.com, Commodities & Futures News
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