Diesel most exposed to Mideast conflict
US ultra-low sulphur diesel futures hit the highest level since February, outpacing gains in oil and gasoline as analysts warned that diesel supply is the most exposed to the conflict in the Middle East.
Israel on Friday launched the biggest-ever direct attack on Iran and said the huge wave of airstrikes was only the start of its campaign. Iran has since launched retaliatory strikes, with explosions heard over Tel Aviv and Jerusalem.
Crude oil futures jumped about 7% as analysts worried Iran's response could include a blockade of the Strait of Hormuz, through which a fifth of global oil supplies traverses. Diesel futures jumped even more, surging about 8% for their biggest single-day gains since April 2022.
Diesel outperformed because the conflict's biggest impact is expected to be on the supply of medium heavy-sour crude grades, which are better suited for production of distillate fuels, StoneX oil analyst Alex Hodes said.
The Middle East is also a major export hub for distillate fuels like diesel, gasoil and jet fuel, said Matias Togni, analyst at oil market insights firm Next Barrel.
The conflict could impact liquefied natural gas (LNG) flows within the region and lead to higher diesel and fuel oil consumption for power generation, with Egypt already showing signs of such a switch, Togni said.
Combined diesel, gasoil and jet fuel exports from the Middle East averaged 1.76 million barrels per day in May, close to 2% of total world oil consumption, according to Kpler data.
Retail spike to follow
Existing inventories for diesel are already low, adding to concerns that the conflict will lower Middle East diesel exports and global production, said StoneX's Hodes.
US inventories of diesel and heating oil stood at 108.9 million barrels in the week ended June 6, about 15% below the past five years' average, US Energy Information Administration (EIA) data showed.
Combined with the surge in crude oil prices, those tight inventories are likely to cause a 10-to-30-cent a gallon surge in retail diesel prices in the US over the next two weeks, GasBuddy analyst Patrick De Haan said.
By contrast, US gasoline stocks were slightly above the five-year average at 214.7 million barrels, the EIA data showed.
GasBuddy is estimating a five-to-15-cent per gallon jump in US gasoline prices over the coming weeks. US gasoline futures rose 8.47 cents to settle at $2.2276 a gallon on Friday, while ULSD futures rose 17 cents to settle at $2.3587 a gallon.
Traders pile into $80 oil bets
Traders on Friday exchanged the most $80 West Texas Intermediate (WTI) crude oil call options since January, expecting more upside to prices after Israeli airstrikes on Iran sparked fears of a wider Middle East conflict.
Call options grant the holder a right to buy futures contract at the pre-set price and date and a rise in volumes can help gauge market sentiment.
About 33,411 contracts of August-2025 $80 call options for WTI crude oil were traded on Friday on a total trading volume of 681,000 contracts, marking the highest volume for these options this year, according to CME Group data
The last time trading was this high for $80 call contracts was on January 10, with 17,030 February-2025 $80 call options traded on a total trading volume of 301,866 contracts.
Oil prices jumped on Friday and settled 7% higher as Israel and Iran launched airstrikes, feeding investor worries that the combat could widely disrupt oil exports from the Middle East.
US WTI crude finished at $72.98 a barrel, up $4.94, or 7.62%. During the session, the WTI jumped over 14% to its highest since January 21 at $77.62.
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