Michael Haigh and Jeremy Salem of Societe Generale highlighted that the Brent risk premium has increased due to US-Iran tensions, Trump’s rhetoric and Houthi blockade threats. Crack spreads in Asia and the US have fared better as refined products remain strong relative to crude. Tanker data shows crude oil flows dominate the Strait of Hormuz, while LNG traffic has lagged badly, bolstering a crude-centric recovery.
Crude oil-led rebound and hardening products
“The Brent contract has gained 12% this week, with most of the rebound occurring on Monday and Tuesday following the resumption of attacks by both the US and Iran. Additional support came from Donald Trump’s short-term proposal of US tariffs to cover the cost of providing safe passage to commercial ships, as well as after Donald Trump reiterated his intention to launch record strikes against military targets. Today, more risks have developed with the Houthis’ statement that the group is responding to what the Saudis say is Saudi Arabia will impose a maritime blockade on the Yemeni capital Sanaa.
“Oil prices initially rose to $91/bbl on the news, but later retreated, suggesting the market remains relatively indifferent about the potential threat to regional energy flows.”
“Crack spreads have strengthened across the board, increasing by 22% in Asia and 12% in the US, which is consistent with greater concern in Asia over the impact of prolonged disruptions to flows through SOH and resulting product shortages.”
“Although the latest reports show that inventories increased by 21 million barrels in June, it appears that most, if not all, of this build has occurred in crude oil rather than refined products.”
“Our analysis shows that the share of crude oil now accounts for approximately 80% of Hormuz transit volume, approximately five percentage points more than before the conflict.”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor. know more.)
