Oil Hits 3-Month High Near $95 as Hormuz Flows Fall Below 2M Bpd, Diesel Supply Tightens

• Oil price climbed to a three-month high near $95 as recent Hormuz flows fell below 2 million bpd
• Middle East crude shipments have dropped from roughly 18 million to 11 million bpd
• Diesel crack spreads surged to a record $108.02 per barrel as refined fuel supplies tightened

The oil price is pushing back toward $100, but the bigger strain is beginning to show further down the supply chain. Brent crude climbed near $95 on Tuesday as shipping through the Strait of Hormuz remained severely restricted, while diesel prices and refining margins continued to rise. Crude is still finding its way onto the market through alternative routes. But turning those barrels into enough diesel is becoming a much tougher problem.

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Oil Price Nears $95 as Hormuz Flows Drop Below 2M Bpd

WTI rose more than 3% to around $94 a barrel on Tuesday, extending gains after settling at $92.65 a day earlier. Brent crude moved closer to the $100 mark after reaching $97.31 on Monday, its highest settlement since July 24.

The move points to just how much Middle Eastern supply has disappeared from normal shipping routes. Regional crude shipments have dropped from roughly 18 million barrels per day before the conflict to around 11 million bpd. Recent Strait of Hormuz flows have fallen below 2 million bpd on some days, although their moving average remains closer to 4 million to 5 million bpd.

Traffic remains thin. Kpler data showed only seven commodity vessels passed through Hormuz on Monday, compared with eight on Sunday. Goldman Sachs has since raised its December crude oil price forecasts, expecting disruptions to last longer than previously anticipated.

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Diesel Supply Becomes the Bigger Problem

The squeeze is sharper in refined fuels. Industry executives estimate roughly 4 million bpd of diesel supply has been lost from Russia and the Middle East as wars disrupt refining operations. Diesel crack spreads, a measure of the profit from turning crude into the fuel, have surged to a record $108.02 per barrel.

US refiners are already running close to full capacity, leaving little room to quickly replace those missing barrels. Vitol expects the shortage to keep global diesel supply tight through winter. Vitol CEO Russell Hardy said,

“There’s really a shortage of products because we’re missing 2 ​million barrels a day from Russia, and we’re missing nearly 2 million ⁠barrels a day from the Middle East.”

Consumers are already feeling it. AAA data shows California’s average diesel prices at roughly $7.83 a gallon, up from $5.14 a year ago, a jump of more than 50%.

For now, alternative pipelines, non-OPEC production and softer demand have kept WTI oil prices and Brent from moving substantially higher. With Hormuz traffic still restricted and diesel inventories under pressure, the next leg of the energy shock may increasingly be decided at refineries rather than oilfields.

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