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  • 22 October 2026
  • Market: Oil Products, Crude

This week's episode looks at shifting crude price dynamics as rising spot sales out of the Middle East bump up against record freight rates. Diesel markets too remain front and central as the US Administration pulls out all the stops to curb runaway pump prices ahead of mid-term elections that are only two weeks away. Iranian determination to wring concessions in return for re-opening the Strait of Hormuz also raises questions as to US & Israeli military intentions. 

  • Physical vs futures pricing: Rising Middle East spot sales have narrowed Brent futures' discount to North Sea Dated, while producers take on more Hormuz transit and insurance risk as export flows recover.
  • Freight and Hormuz security: Repeated shipping attacks keep freight costs very high, while Asian refiners are seeking lower Middle East term volumes to diversify supply.
  • Diesel tightness and policy response: Diesel cracks remain near triple-digit levels and inventories are low. Policy moves are unlikely to help soon because refinery capacity is stretched and Russian flows are constrained.
  • Macro and political fallout: Fuel prices are stoking inflation and highlighting AI boom/bust risks. The US and Israeli elections and Iran's demands for any reopening of Hormuz add further uncertainty.

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  • Hi and welcome to Episode 6 of our From the Economist’s Chair podcast “Oil in Focus”
  • Since our last episode, rising spot sales of Middle East crude have weighed on physical benchmark prices relative to crude futures.
  • ICE Brent closed last night near $109 while NYMEX WTI was just shy of $102.
  • Brent futures are trading at a discount of around $10/bl versus physical North Sea Dated and that compares with discounts nearer $25 in the first half of October.
  • Freight costs remain sky-high with over 20 attacks reported on shipping in and around the Strait of Hormuz in the last two weeks.
  • The Argus Crude Tanker Index for VLCC voyages may have eased from last week’s $31 per barrel but it remains at a fairly chunky $27 currently.
  • It seems that some ongoing term contract negotiations between Asian crude buyers and their Middle East suppliers involve lower annual volumes as refiners seek to diversify their sources of supply to other regions, expensive freight notwithstanding.
  • Indeed Saudi Arabia, Iraq, the UAE, Kuwait and Qatar have all reportedly been selling crude on a spot basis, much of it either delivered or involving STS transfers around the Gulf of Oman.
  • So producers are increasingly shouldering the risk of moving cargoes through Hormuz and absorbing that portion of elevated transportation and insurance costs themselves.
  • Tanker tracking estimates show aggregate Middle East crude export flows in September & October rising to between 15-18 mb/d compared to a low point of 8 mb/d back in May.
  • As was the case in our last episode, diesel prices have rather stolen the limelight from crude, with European diesel cracks widening to over $80/bl again and those on the US Gulf Coast continuing to flirt with $100 per barrel.
  • Refiner inventories remain below seasonal norms though the gap is more pronounced in the US than it is in Europe.
  • The Trump Administration continues to try to jawbone diesel pump prices lower though these actually rose again to a national average of $6.30 per gallon this week.
  • The threat seems to be fading for now of a US diesel export ban which could have deprived global markets of a further 1.4 mb/d of fuel on top of the 1.5 mb/d of lost Middle East & Russian exports.
  • Washington has persuaded European IEA member countries to accelerate stock releases of diesel and other fuels originally pledged under their collective action back in March, while also loosening sanctions on Russian diesel exports.
  • However, with Russian flows struggling to average 150 kb/d in the last three months this seems unlikely to have much impact on prices in the immediate future, unless attempts to end Ukrainian attacks on Russian refineries and diesel export facilities gain traction.
  • Meanwhile, recent appeals by US Energy Secretary Chris Wright to US refiners to boost supply similarly seem unlikely to bear fruit.
  • US refinery utilisation levels in excess of 95% leave scant room for manoeuvre, with autumn maintenance and Atlantic hurricane risks similarly likely to cap diesel supply upside.
  • The political implications from elevated diesel prices are key here.
  • Fuel price hikes, on top of the Trump Administration’s trade tariffs, tax cuts and immigration controls are all stoking US consumer price inflation.
  • This hit 3.7% in September, with European consumers similarly afflicted, and even Chinese manufacturers saw their input costs rise by 5% in September.
  • The US stock market and consumer spending meanwhile have been supported during the Middle East crisis by a surge in AI-related data centre investment which is itself inflationary for raw materials.
  • The rising debt profiles of an erstwhile low-leverage technology sector leaves the AI boom also prone to a major correction in the face of rising bond yields and central bank rate hikes.
  • Meanwhile, the US mid-term elections on 3 November also look likely to swing on cost of living concerns, with polls currently suggesting a Democrat sweep of both houses of Congress is far from being out of the question.
  • Israel too goes to the polls on the 27 October, and the two coalition partners in the war with Iran have noticeably this week stepped up discussion about further military attacks against the regime in Tehran.
  • Whether such threats will persuade the Iranian regime to modify its maximalist demands for a re-opening of the Strait of Hormuz remains an open question.
  • That’s a lot to digest for the weeks ahead, so do check out Argus Consulting’s latest Oil Fundamentals Report due for release this evening as well as Argus Global Markets and Petroleum Argus on Friday.
  • Thanks for listening and see you next time for another Oil in Focus from Argus Media.

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