Oil prices surged more than 4% on Monday, reaching a 16-week high. This increase follows recent strikes on Saudi Arabian energy infrastructure and attacks on vessels in the Middle East, heightening concerns over energy supply disruptions. The escalating tensions in the region have prompted market reactions, reflecting the vulnerability of global energy supplies.
With the pipeline out of service, the Red Sea port of Yanbu will have to draw on storage, which is estimated to cover five to seven days of exports, according to three industry sources.
U.S. diesel futures were trading around $5.18 a gallon on Monday, putting the contract on track to top a record $5.14 set in April 2022. That futures price gain also boosted the heating oil crack spread, which measures refining profit margins, to an all-time high of around $114 a barrel, according to LSEG data.
“The relatively contained price reaction suggests the market still expects Saudi inventories to cushion exports in the near term, but if the disruption extends beyond the five-to-seven-day inventory cushion, that could change quickly,” said Janiv Shah, oil markets analyst at Rystad. “Short of stopping both oil-price-affecting wars and curing the global refinery (capacity) problem, our fraternity is wondering where an inoculation against $120 Brent can be found,” said PVM analyst John Evans, pointing to Russian refinery outages and falling stockpiles.
