The Crude Is Back, the Diesel Is Not: Why October's Oil Market Is a Products Market
Seven months into the war with Iran, the crude oil numbers out of the Gulf look close to normal. Kpler data cited by BBC Verify show daily oil flow from the Middle East at 92 per cent of its pre-war baseline in the final week of September. Yet Brent ended the week above $102 a barrel, US diesel hit $6.50 a gallon, European diesel set a record and G7 leaders agreed on Friday to release 100 million barrels of stocks with diesel at the front of the queue.
China, meanwhile, has stopped exporting refined fuels. BBC Verify reports Kpler's estimate that an average of 12 million barrels a day passed through Hormuz in the week to 30 September, against a pre-war baseline of 17 million. The common thread is that crude volumes have recovered strongly, through three channels. As Kpler's Naveen Das told the BBC, greater pipeline use is likely to become the "new normal". BBC Verify reports fewer than one million barrels a day of processed products passing through Hormuz in the last week, against 3.5 million before the war.
Crude moves in very large carriers run by state-linked or long-term charter operators who have accepted escorts and war-risk premiums. Argus has assessed the VLCC rate from the Middle East through Hormuz to Asia-Pacific at $34.31 a barrel since 18 September, the highest since it began assessing the route in 2016, and reports one charter of a 2004-built VLCC provisionally fixed at $2 million a day. On 1 October China again suspended refined product exports, according to Energy Intelligence, citing market sources, a step that signals Beijing's concern over domestic gasoline and diesel supply.
The size of the effect was not quantified in reporting through Friday. The National reports that leaders agreed to release 100 million barrels of diesel and other reserves through the International Energy Agency, beginning immediately and continuing over four months, including a front-loaded substantial diesel release within the first 20 days. The US had threatened a diesel export ban, and the IEA says the US supplied roughly half of the EU's diesel imports in August.
The seven OPEC+ countries that have been unwinding voluntary cuts meet on 4 October, and delegates expect November quotas to be held, according to Reuters reporting carried by IndexBox. The market is pricing a negotiation rather than a blockade, as traders quoted by HNGN put it. Ground News, which aggregates ratings from AllSides, Ad Fontes Media and Media Bias/Fact Check, classes the outlets covering this story as 20% left-leaning, 46% centre and 34% right-leaning (18 sources, 43 sources and 31 sources respectively, excluding outlets without a bias rating).