Societe Generale’s Michael Haigh and Jeremy Sellem highlight that Brent has surged as US-Iran tensions, Trump’s rhetoric and Houthi blockade threats lift risk premia. Crack spreads in Asia and US have outperformed as refined products stay tighter than crude. Tanker data show crude dominating Strait of Hormuz flows, while LNG traffic lags badly, reinforcing a crude-centric recovery.

Crude-led rebound and tighter products

"The front month Brent contract is up 12% this week, with most of the rebound occurring on Monday and Tuesday following the resumption of strikes by both the US and Iran. Additional support came after Donald Trump reiterated his intention to launch record strikes against military targets, alongside a short-lived proposal for US fees to cover the cost of providing safe passage to commercial vessels. Today, more risks developed with the Houthi’s stating that they would impose a maritime blockade on Saudi Arabia in response to what the group says is Saudi Arabia’s siege on the Yemini capital, Sana’a."

"Oil prices initially rallied toward $91/bbl on the news, but subsequently retreated, suggesting the market remains relatively complacent about the potential threat to regional energy flows."

"Crack spreads have strengthened across the board, rising 22% in Asia and 12% in the US, consistent with greater concern in Asia over the impact of prolonged disruptions to flows through the SoH and the resulting risk of product shortages."

"Although the latest reports suggest that inventories increased by 21 million barrels in June, the majority, if not all, of this build appears to have been in crude oil rather than refined products."

"Our analysis suggests that crude oil now accounts for nearly 80% of Hormuz transit volumes, around five percentage points higher than before the conflict."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)