John Kingston
5 min read
Oil futures prices soared Friday on the back of Israel’s attack on Iran, but there were no indications any oil-related facilities had been impacted by the multi-pronged offensive by the Israeli military.
“Non-nuclear energy infrastructure has not been expressly threatened by any party thus far,” S&P Global Commodity Insights (SPGCI) (NYSE: SPGI) said in a “factbox” summary of key energy-related developments stemming from the Israeli attack.
Ultra low sulfur diesel (ULSD) on the CME commodity exchange settled at $2.3587/gallon, an increase of exactly 17 cts/g or 7.77%.
Friday’s ULSD settlement is the highest since February 27.
The one-day increase of 17 cts/g is the highest since Jan. 10. The last time ULSD increased as much as December 2022, when it rose more than 18 cts/g. But the gain that day was 5.97%; today’s was 7.77%.
The higher ULSD levels followed increases in global crude markets, which at first tend to rise or fall more in percentage terms than products like gasoline or diesel in reaction to real or potential disruptions in oil supply or demand. But that did not occur Friday, with ULSD rising more than the two key crude benchmarks in percentage terms.
Brent, the global crude benchmark, rose $4.87/barrel on the CME, an increase of 7.02% to settle at $74.23/b. West Texas Intermediate, the U.S. crude benchmark, climbed $4.94/b to $72.98/b. That marked a percentage gain of 7.26%.
What’s at stake through any widening of the war to include Iranian capacity to produce crude was spelled out by SPGCI in its factbox. The SPGCI segment, which houses the legacy Platts business, said Iran produced about 3.25 million b/d of crude in May.
Of the countries in the OPEC+ group of oil exporters, only Saudi Arabia, Russia and Iraq produced more. The U.S. is the world’s largest crude producer with output of about 13.24 million b/d, according to the latest report by the Energy Information Administration.
But since the Iranian Revolution in 1979 and the takeover by its Islamic leaders–and its breach with most other Arab oil producers–the nightmare scenario for oil consumers has always been that Iran would take steps to close the Strait of Hormuz, which is the entrance to the Persian Gulf. Some portion of oil exports from Saudi Arabia, Kuwait, the United Arab Emirates, Iraq and Iran all pass through the Strait of Hormuz.
But despite those fears that have now been in place for more than 45 years, a closure has never happened. Several analysts Friday said it was not likely to happen this time either.
