Brent tops $100 as Houthi attacks hit Saudi tankers in Red Sea
Brent crude broke back above $100 a barrel Thursday, the first time in nearly two months, after Iran-backed Houthi militants said they attacked two Saudi tankers in the Red Sea. Front-month September Brent traded at $100.69 mid-morning, up more than 7% on the day, after touching $101.01. WTI moved sharply higher with it, and the whole Brent forward curve lifted.
The Red Sea mattered because it was the workaround. With shipping through the Strait of Hormuz already disrupted, some Saudi barrels had been routed around the problem. Attacks on that route close off the alternative. Traders are pricing longer disruption, not a one-week scare, and that shows up in the curve rather than just the front month.
For jobbers, a 7% crude day does not stay in crude. Rack prices follow, usually within a day or two, and the operators who bought forward or locked in supply contracts are in better shape this week than the ones buying spot. Watch your margin on the street side, because retail rarely moves as fast as the rack.
OPEC+ output targets
OPEC+ is expected to approve another increase when eight producers meet August 2. Reuters reported Thursday that the group would raise its combined September target by 188,000 bpd, the same step it has used for each of the last three monthly targets. Saudi Arabia and Russia are two of the eight. The others named are Iraq, Kuwait, Algeria, Kazakhstan and Oman.
The catch is that these targets have been mostly paper since the Iran war upended Gulf exports. A higher number on a spreadsheet does not put barrels on a ship. If the group is raising targets it cannot physically fill, the bearish signal buyers might normally read into an OPEC+ increase is weaker than usual.
India's export surge
India is on track to ship as many as 1.55 million bpd of light and middle distillates in July, per Kpler data cited by Reuters columnist Clyde Russell. That is close to double the 866,000 bpd it exported in May, when the Hormuz crisis cut crude supply to India and the rest of Asia.
Indian refiners are running hard because margins jumped with the conflict. Most of those barrels go to Europe. Africa and the Middle East take much of the rest. That pulls competing supply away from Atlantic Basin markets and helps hold up diesel cracks on this side. Refining margins are where the money is right now, and US refiners are seeing the same crack economics the Indians are.
The RFS bill and Honeywell
Senators Merkley and Bentz introduced a bill to widen the RFS definition of renewable biomass. Any change to what qualifies as feedstock eventually shows up in RIN prices and in what blenders pay, so it is worth tracking even at the introduction stage.
Separately, Honeywell closed its £1.325 billion all-cash purchase of Johnson Matthey's Catalyst Technologies business, adding to its refining and petrochemical catalyst position.
What to watch
Whether the Houthis hit more Saudi tonnage, and whether insurers repricing Red Sea transits push more crude onto longer routes. The August 2 OPEC+ meeting for the September number. And the diesel crack, which could stay firm if Asian and Middle East supply keeps getting pulled elsewhere.