Brent crude hits $110 as US offers 17 million more SPR barrels into a tight diesel market
Brent crude closed at $110 a barrel on Friday, up 3.7% on the day and its first close above that mark since May. Houthi strikes on Saudi Arabia and the Russia-Ukraine energy attacks stacked more supply risk onto a market that already had none to spare. For US jobbers and haulers, the number that matters is the one at the rack, and diesel is climbing with the barrel.
The SPR offer
Washington put another 17 million barrels of crude on offer Friday, one day after the IEA accelerated its emergency stock releases. The Department of Energy issued a request for proposals for an exchange of up to 17 million barrels, part of the 172 million the US committed under the IEA's 400-million-barrel action announced in March.
The reserve is thin for this kind of lean. The SPR holds about 283 million barrels now, so the US is leaning on a smaller cushion than it had the last time crude ran this hot. An exchange means refiners take barrels now and return them later, which gets product moving without a permanent drawdown, but it does nothing to add new crude to the pool.
Watch whether these barrels actually clear. A request for proposals only puts barrels on offer. Refiners bite only if the terms beat buying on the open market.
Ryazan offline
One main unit at Russia's Ryazan refinery stopped after a drone attack, Reuters reported. Ryazan is one of Russia's larger refineries, and every unit that goes offline there pulls more Russian product out of the export stream that the rest of the world is drawing on.
US operators do not buy Russian diesel, but the barrels Europe loses to these strikes get replaced from the same global pool US importers tap on the coasts. Fewer refined barrels moving internationally tightens the screws on the Gulf and East Coast cargoes that set spot diesel here.
Jamnagar in the Atlantic trade
Reliance's Jamnagar complex in Gujarat is one of the biggest export refineries on the planet, and its diesel reaches US buyers through the Atlantic trade. For a US fuel buyer, Jamnagar running at full tilt and shipping west is one of the few things holding the lid on distillate supply right now.
What to watch
A few things decide where this goes next. The SPR exchange has to draw real bids next week to matter. Ryazan's unit could stay down or come back online. And if the Houthi strikes on Saudi infrastructure keep hitting, that risk premium stays priced across the market.