Week in Review – Supply Risks Keep Energy Markets Under Pressure

Fuel markets remain under pressure as global disruptions tied to the Iran conflict continue to influence pricing across crude, diesel, and gasoline. Crude prices have climbed to their highest levels since 2022, while refined products have experienced sharp daily swings. In the latest FUELSCast episode, Mansfield executives Andy Milton, Senior Vice President of Supply and Distribution, and Dan Luther, Vice President of Sales, explained that the issue in the U.S. is not an immediate physical fuel shortage, but a global price shock driven by constrained flows through key transit points such as the Strait of Hormuz. Policy measures may add supply, but their impact on pricing is expected to remain limited.

Diesel markets are showing the most strain, with U.S. inventories running below typical levels as the industry enters refinery maintenance season. This tightening supply is contributing to higher prices and wider regional disparities, particularly in areas further from refining hubs. "It's not a physical supply issue in the U.S., but it is a price shock because we're tied to global market dynamics," said Dan Luther. As volatility persists, the current market structure continues to signal near-term tightness, reinforcing the need for closer monitoring of supply conditions, regional differences, and longer-term pricing strategies.

Prices Hold Firm

WTI futures opened this morning near $95 per barrel, down about $1/bbl ahead of the April contract expiry and on track to finish more than $3.50 lower week-over-week. Earlier in the week, WTI briefly moved above $101/bbl before easing. At the same time, Brent climbed above $117/bbl, reflecting tighter global supply.

The main issue remains the limited supply moving through the Strait of Hormuz. An estimated 12 million barrels per day have been impacted by lower exports, delays, and production cuts. Attacks on energy infrastructure across the Middle East added to the pressure this week. Iran's response to earlier strikes included hits on oil facilities in Kuwait, Saudi Arabia, and the UAE. In Kuwait, drone strikes caused fires at the Mina Al-Ahmadi and Mina Abdullah refineries, though both were brought under control.

Some of the pressure eased midweek after Israeli Prime Minister Benjamin Netanyahu said Israel would stop targeting energy infrastructure and support efforts to reopen the Strait of Hormuz. Prices pulled back from their highs following those comments. However, uncertainty remains. The U.S. is still considering actions that could further impact Iran's oil exports, including potential moves involving Kharg Island, which handles most of Iran's crude shipments. At the same time, the U.S. confirmed it does not plan to restrict its own oil and gas exports, which helped calm markets.

Physical oil markets are showing clear signs of tight supply. Refiners in Europe, Africa, and Asia are competing for available barrels, pushing prices higher. In Europe, key crude grades are trading at strong premiums to Brent. North Sea cargoes for April are mostly sold out, and buyers are paying more to secure supply now rather than later. This is also reflected in the market structure, where near-term prices are higher than future prices, signaling immediate supply shortages.

Refined fuel markets are tightening even more. Diesel and jet fuel prices have moved higher as refineries face limited crude supply and strong demand. In Europe, diesel prices have risen above $200 per barrel equivalents, and jet fuel is nearing $220/bbl. Refining margins have increased, encouraging refiners to keep buying crude even at higher prices, which adds to overall market pressure.

Trade flows are shifting as buyers look for alternative supply. Asia has increased purchases of U.S. crude, with about 60 million barrels expected to arrive in April, the highest level since 2023. More shipments are also moving through the Panama Canal, even though it raises transportation costs. This shows how tight the market is, with buyers willing to pay more just to secure supply.

Policy actions may provide some relief, but not enough to fully balance the market. The U.S. is considering releasing more oil from its Strategic Petroleum Reserve. There are also discussions about allowing Iranian oil stored on tankers - estimated at about 140 million barrels - to return to the market. While these volumes could help in the short term, they are small compared to the scale of current supply disruptions.

Looking ahead, prices are likely to remain elevated. As long as flows through the Strait of Hormuz remains limited and infrastructure risks persist, supply will remain tight. At the same time, countries are increasing stockpiles to protect against further disruptions, which adds to demand. This combination is expected to keep pressure on oil, diesel, and gasoline prices in the near term.

Prices in Review

Crude prices opened at $100.93 on Monday before falling to $94.41 on Tuesday, the lowest level of the week. The market recovered to $96.00 on Wednesday and continued higher to $99.13 on Thursday, nearing the week's starting point. However, prices declined again on Friday to $95.00, resulting in an overall loss of $5.93 per barrel or 5.9%.

Diesel prices trended higher overall during the week, despite an early decline. Prices opened at $4.0501 on Monday before dropping to $3.8561 on Tuesday. Prices rebounded to $3.9976 on Wednesday and continued to rise to $4.3262 on Thursday. By Friday, diesel edged up to $4.3359, marking the highest level of the week. From Monday to Friday, diesel prices increased by $0.2858 per gallon, representing an overall 7.1% gain during the week.

Gasoline prices were relatively stable throughout the week, with modest gains followed by a slight pullback. Prices opened at $3.0900 on Monday, then rose to $3.1358 on Wednesday and $3.1612 on Thursday. By Friday, gasoline eased to $3.1131, up $0.0231 per gallon, for an overall 0.7% rise during the week.