Refined Product Futures Giving Up Gains While White House Deliberates On Israel-Iran Intervention

Refined product futures have given up the majority of the gains they enjoyed during yesterday’s abbreviated trading session on news that it may take the White House up to two weeks to make a decision on its potential Israel-Iran intervention. The prompt month diesel contract is ‘only’ up about 4.5 cents while its gasoline counterpart trades just on the green side of flat.

Its expiration day for the July WTI contract so most will be ignoring its price action today and focusing on the August contract, which saw 5x the traded volume of its predecessor yesterday. August crude oil is currently down about 33 cents per barrel in pre-market trading.

The secret is in the sauce: the reason diesel prices have been outpacing other petroleum futures during this week’s run is, in part, due to the particular crude grade that would be bottlenecked if the Strait of Hormuz is blocked by Iran. Saudi Arabia, Iraq, and Kuwait are among the largest exporters of medium heavy-sour crude oil, which favors distillate products when refined compared to other crude grades. On the other side of the barrel, a blockade in the Strait would also choke refined product exports, particularly from Kuwait (who had record exports last year), UAE, and Saudi Arabia. Europe has become increasingly dependent on diesel exports from the Persian Gulf since the Russian invasion of Ukraine in 2022.

It’s been a week since the Environmental Protection Agency published their Renewable Fuel Standard proposal for 2026 and 2027, sparking a rally in D4 and D6 RINs, that has since cooled. The EPA is planning to hold an assuredly timid public hearing on July 8th to receive public testimony on their proposal. If a sternly written letter is more your speed, the Agency will be open to receiving comments up to August 8th.