ULSD Futures Soar to 3-Year Highs as Iran War Drags


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Diesel prices soared to more than three-year highs Thursday 
(3/5) morning on the back of a rally in European gasoil futures as more 
refiners in Asia were forced to scale back operations and cancel product 
exports as the Iran war hit crude deliveries from the Middle East.

   NYMEX ULSD futures' front month, April, peaked at $3.5755 gallon, the 
highest since the $3.5800 level it touched in January 2023. ICE gasoil for 
March soared to $1,130.25 tonne, the highest since October 2022.

   The rally in both came as tanker traffic through the Strait of Hormuz 
remained at a virtual standstill on the sixth day of a widening U.S.-Israeli 
conflict with Iran, cutting off some 5 million bpd of refined product supply.

   The Middle East has become a vital supplier of diesel to Europe after the 
European Union banned refined product imports from Russia in February 2023, a 
year after Moscow invaded Ukraine.

   Several refiners in Asia who are heavily dependent on Middle Eastern crude 
oil, meanwhile, have started to reduce crude throughput and cancel exports amid 
a lack of crude deliveries from the Persian Gulf, where some 14 million bpd of 
crude oil supply remained stranded.

   The 300,000-bpd capacity Mangalore refinery in India on Wednesday told 
clients it may not be able to fulfill export obligations, and the Chinese 
government advised major refineries to suspend product exports. Refiners in 
Indonesia and Japan have also started to cut runs, and refiners in Thailand 
were told to halt fuel exports.

   An escalating war added to supply risks. Iranian drones and missiles struck 
several U.S.-allied countries in the region over the week, dragging them into 
the conflict. On Wednesday, U.S. and Israeli officials said Kurdish militias 
from northern Iraq have started a ground offensive, although that claim was 
denied by both the semi-autonomous Kurdish government and Iranian state media. 
Iran's Revolutionary Guard on Thursday claimed to have struck a U.S. oil tanker 
in the Persian Gulf.

   At 8:40am ET, NYMEX WTI crude futures for April delivery were up $2.29 to 
trade near $76.95 bbl, and ICE Brent crude for May delivery advanced $1.89 to 
$83.29 bbl.

   Downstream, aside from ULSD, RBOB futures for April delivery soared as well, 
by $0.0769 to $2.5918 gallon.

   The U.S. dollar index strengthened by 0.245 points to 98.975 against a 
basket of foreign currencies.




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