Brent crude oil rose 4.6% to $94.65 on September 1, marking the highest close since July 24; West Texas Intermediate rose 5.2% to $90.22. This week, Brent briefly surpassed $95, with traders refocusing on $100.

Diesel is tighter. U.S. diesel futures reached a 52-month high, rising about 51% over the past ten weeks; the crack spread is approximately $107/barrel according to London Stock Exchange Group data, a record. New York Harbor wholesale diesel rose nearly 7% to $4.71 per gallon. The national retail average is about $5.69 per gallon, close to the wartime peak of April and the historical high of $5.80 in May 2022. The Intercontinental Exchange diesel crack also hit a record high of about $79/barrel, with the September to November spread at about $80/ton. European natural gas futures reached their highest level in 2023, rising about 11% this week.

Supply risks stem from the Strait of Hormuz, damage to Gulf refineries, and Ukraine's strikes on Russian refineries. Goldman Sachs stated that global refinery throughput is about 7 million barrels per day lower than last year, with seasonal lows nearly 6 million barrels per day since March. S&P predicts Middle Eastern refining capacity will be about 8 million barrels per day in 2026, down 1.6 million barrels from 2025. U.S. refinery utilization is about 97%. The Energy Secretary stated that 17 million barrels of crude oil crossed the strait on Monday, the highest single-day figure since the war began, but the number is in doubt. Trump has summoned refinery executives to demand increased diesel and gasoline production. Brown University estimates that since the war began, Americans have paid an extra $52.3 billion for gasoline and $43.4 billion for diesel, averaging about $731 per household.

Energy costs are impacting freight, agriculture, construction, and household bills. The European Central Bank and the Bank of Japan have raised interest rates due to war-induced inflation, prompting the market to reassess the Bank of England's rate hikes this year. The World Bank has warned that if the conflict lasts more than six months, inflation could reach 4.5%. About one-third of OECD fixed-rate debt will mature between 2026 and 2028. Fossil fuel subsidies are expected to reach $1.1 trillion by 2026.

Who is buying and who is selling: The event is driven by expectations of refined oil supply shortages, not a sudden expansion of global demand. Traders and air freight companies are buying diesel paper contracts and hedging cracks; accounts betting on a restoration of the strait are selling long-term contracts. Benefiting are U.S. refiners with nearly $90/barrel diesel processing margins, while emerging market finances for freight, agriculture, and imported energy are under pressure. Funds are flowing from the crude curve to middle distillate cracks, with the interest rate market interpreting the war as a more persistent supply-side inflation.

Source: Public Information