ING analysts Warren Patterson and Ewa Manthey note Oil prices have extended gains as US–Iran tensions escalate and tanker flows through the Strait of Hormuz remain under pressure. Large second-quarter inventory drawdowns and the imminent end of global SPR releases leave the market more exposed. Physical benchmarks like Dated Brent and Mars crude differentials are strengthening, underscoring tighter supply conditions.

Persian Gulf flows tighten physical market

"Oil prices managed to eke out a third day of gains amid few signs of de-escalation between the US and Iran. The US carried out additional strikes against Iran. There are also media reports that the US is considering increasing military operations."

"The concern is that renewed oil supply disruptions come amid the large inventory drawdowns through the second quarter, leaving the market more vulnerable. In addition, global SPR releases, which have helped the market out over recent months, are set to end in the next few weeks."

"The reduction in Persian Gulf energy flows is having an obvious impact on the physical market. Dated Brent vs. front-line Brent futures (DFL) is back at a premium of $1.30/bbl, having traded at a discount to the futures through late June and early July. Meanwhile, in the US, Mars crude differentials have rallied."

"According to the EIA, US commercial crude oil inventories fell by 1.69m barrels over the last week. When taking SPR releases into consideration, total crude oil inventories fell by 4.68m barrels. US commercial crude oil inventories remain near the lowest levels since 2022, while seasonally they are at their lowest level since 2018."

"However, middle distillate markets, both in the US and globally, remain very tight. This is well reflected in the strength in middle distillate cracks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)