US refineries have run above 95% of capacity for 11 weeks running as crude slides on pending Iran sanctions
American refineries have been flat-out above 95% utilization for 11 straight weeks, and that streak is the number US fuel buyers should watch. Plants running that hard have no cushion. One unplanned outage at a big Gulf Coast unit and the supply that has been keeping pumps full gets thin fast, which is why analysts are calling the global fuel picture fragile even with crude coming off.
WTI fell more than $1.50 a barrel Monday morning to around $85.50, giving back part of last week's roughly $5.50 gain. Brent traded near $93. The market took profits and waited for details on new US sanctions Washington is preparing against Iran.
The Iran sanctions
The pending sanctions are why crude gave ground instead of climbing. Traders read fresh US pressure plus a naval blockade as more supply staying bottled up in the Persian Gulf, and the uncertainty about when tankers can freely exit has kept a risk premium in the price for weeks. Iran's rial dropped to 2.02 million to the dollar on informal markets against an official 1.5 million, a sign the earlier sanctions are already biting hard.
For a US jobber, the takeaway is simple. Crude could ease further if the strait stays open and the sanctions land without a shooting response, but any move that chokes Gulf exports would push the barrel back up and squeeze the diesel and gasoline you buy off refineries that have no spare runs to give.
Russian supply offline
Russia's Perm oil refinery halted operations after an August 21 drone strike, one more hit in what has become a near-daily Ukrainian campaign against Russian refining, some of it more than 1,000 miles from the border. Russia has run short on gasoline and diesel since spring, and Deputy Prime Minister Alexander Novak spent the day trying to calm fears the shortage is getting worse.
This doesn't hit US racks directly. It matters because Russian barrels that would normally clear into export markets are staying home to cover domestic pumps, which keeps the global product balance tight at the same moment US plants have nothing left to add.
Europe's winter bid
Goldman Sachs says European gas prices need to jump by December for storage to fill enough for winter, with inventories about 62% full and Europe losing the spot LNG fight to Asia while Qatari volumes stay offline. Higher European gas pulls on the same LNG cargoes US exporters sell, and a strong winter bid abroad tends to firm US natural gas and feedstock costs into the fall.
What to watch
The sanctions detail and whether it touches Gulf tanker traffic. Any US refinery going down while utilization is this high. Whether Russia's outages keep spreading. And Europe's LNG buying as December nears.