Brent hits five-month high near $100 as ship and Saudi site attacks tighten crude supply

Brent crude climbed to a five-month high after attacks on tankers and Saudi facilities raised supply worries, and that puts a firm floor under US wholesale costs. Crude is once again nearing $100 a barrel. For jobbers watching rack prices, the odds of relief on the buy side look thin while the supply scare holds.

Bayway lockout

Phillips 66 locked out nearly 400 union-represented workers at its Bayway refinery in Linden, New Jersey, after a contract extension expired Monday at 4 p.m. Teamsters Local 877 members picketed overnight carrying signs reading "Locked Out" and "Pay Up." The original contract ran out Oct. 1.

Local 877 President Jeff Sanford told News 12 that many workers run 13 days and 13 nights on before a single day off, and the union wants a larger share of company profits. Bayway is one of the larger refineries feeding PADD 1. A drawn-out lockout could tighten East Coast gasoline and diesel supply if the plant can't run normal rates on management and replacement labor.

Pump prices

The national average is $4.33 a gallon, down a few cents from last week, per AAA. Prices have stayed above $4 since late July and run more than a dollar higher than this time last year. Fall usually brings cheaper gas, but the oil-market volatility has held pump prices at seasonal highs.

Gasoline demand actually eased. EIA data show it fell from 8.76 million barrels a day to 8.40 million last week. Softer demand into a high-crude market is why pump prices have mostly gone sideways instead of following crude higher.

Diesel margins

Diesel is rising faster than crude, and the mechanics come down to tight distillate supply holding refining margins high in some regions. JobbersWorld reports that higher shipping and insurance costs are cutting into refinery economics elsewhere, so the margin picture is uneven depending on where the barrels move.

Freight is a big part of it. Reuters reports Asian refiners are switching to smaller tankers and buying crude on a delivered basis as freight rates climb. Higher shipping costs that squeeze overseas refiners can pull product away from export markets, and that may keep US diesel cracks firm into winter heating season.

What to watch

Whether the Bayway lockout drags on and pinches East Coast supply, or settles fast. Whether Brent eases if the attacks on shipping lanes and Saudi sites stop, or holds near $100 if they continue. And whether diesel margins stay fat into winter, which would keep haulers paying up at the pump even if gasoline demand stays soft.