Oil And Diesel Rally On Escalating Infrastructure Attacks

Energy markets are rallying with conviction to start the week after a weekend of attacks on Saudi energy infrastructure, Russian refineries, and shipping through the Strait of Hormuz. Refined product futures are up around 13 cents while both American and European crude oil benchmarks add nearly $4 to their prompt month contracts.

October ULSD traded as high as ~$5.14 over night, just 2.5 cents below the annual high set last Thursday at $5.1664. With little in the way of bearish headlines, the market seems content to see just how high diesel futures can climb before something breaks, whether it be nations’ war resolve or consumer demand.

Friday’s profit taking ended eight consecutive days of higher prices for WTI that pushed the benchmark above $100 last week, for the first time since May. The position squaring barely dented the month-long rally the bulls have been enjoying: September has seen crude oil prices raise nearly 16% with little reason for sellers to step in.

Saudi Arabia confirmed Friday that it shut the East-West crude oil pipeline it had been using to circumvent the stagnant Strait of Horuz. Multiple attacked on Thursday morning in the Riyadh and Madinah regions caused several injuries and forced the Kingdom to cease operating the pipeline, shutting away a potential 7 million barrels per day from global markets.

Ukraine kept its ballistic sanction campaign going Sunday, striking 72mbd refinery in Krasnodar region, and a much larger 329mbd complex in Tatarstan. The attacks on Russian refineries is showing up at the pump too, with several areas around the country reporting gasoline shortages.

Baker Hughes reported an increase of 3 active oil rigs each in the U.S. and Canada.

Money managers added net length just about everywhere last week, with profit-taking in ULSD positions being the only standout.