Brent Jumps Past $107 as Trump Rejects Iran Proposal and WTI Slumps to a Record Gulf Discount
ICE Brent climbed above $107 a barrel on Monday after Washington rejected Tehran's Hormuz proposal, while WTI lagged near $94 as a possible US diesel export ban threatened refinery run rates and pushed the Brent-WTI spread to the widest of the crisis.
Crude opened the week higher after US President Donald Trump rejected a peace proposal Iran had tabled at the UN General Assembly through Qatari mediators, leaving the Strait of Hormuz closed and the diplomatic track stalled. OilPrice reported Brent trading at $107.24 a barrel and West Texas Intermediate at $94.10 in early Monday trade. The Wall Street Journal reported over the weekend that the administration is considering a resumption of military strikes on Iran once the November midterms are over, extending the horizon for supply disruption. Iran continues to condition any reopening of Hormuz on the lifting of the US naval blockade, oil sanctions and the unfreezing of Iranian funds, conditions Washington has so far refused.
The spread structure shows the disruption is priced very differently at the two benchmarks. EnergyReader's Friday settlement recap put ICE Brent front-month at $104.84 a barrel, up 0.86% on the day and 1.42% on the week for a third consecutive weekly gain, while NYMEX WTI settled at $89.10, down 3.29% on the day and 10.48% on the week. The resulting $15.74 Brent-WTI gap is the widest of the crisis and reflects freight economics: VLCC rates reached a record $1.27mn a day as ship-to-ship transfer capacity off Oman saturated, while talk of a temporary US diesel export ban would force refiners to cut runs and leave more domestic crude available.
Physical differentials and product cracks point to a market where refining, not crude supply, is the binding constraint. Urals was assessed at $107.23 a barrel, up 0.73% on the week, Dubai at $113.86 and the OPEC basket at $114.53, while NYMEX ULSD settled at $4.80 a gallon and RBOB at $3.41. Saudi Arabia has sold roughly 100mn barrels to Asian buyers via Hormuz since mid-last week for October-November delivery after its East-West pipeline went out of service, and Vitol bought at least 25mn barrels of Iraqi crude for September loading at discounts of $15 to $20.80 a barrel to official selling prices. The US oil rig count rose to 599, up three on the week and 50 year on year, the second consecutive weekly gain.
Gas markets moved the other way. Platts assessed JKM LNG front-month at $26.38 per MMBtu, flat on the day but down 4.11% on the week, leaving Asia at a $2.30 premium to TTF on a straight conversion, while Dutch TTF front-month closed at EUR 72.13 per MWh, down 9.31% for its worst week since mid-June. Qatar ramped LNG tanker traffic through Hormuz to the highest in over two months, even as Hormuz transits crashed to single digits with only nine commodity carriers passing on Thursday against a 10-day average of 18. EU storage stood at 70.3% full, or 796.1 TWh, with a sharp internal split between France at 81.4% and Italy at 86.2% against Germany at 57.0% and the Netherlands at 56.5%.