Heating Oil Futures

CGS International (Thailand) or CGSI stated in its analysis that it maintains a positive view on the Thai refining group. Although China is increasing exports of refined oil products, it is expected to be a gradual easing, as China prioritizes domestic energy security. Meanwhile, the Middle East conflict may delay the start of operations at the Huajin Aramco refinery to October-November 2026. Excluding the recovery in refining volumes during the US-Iran ceasefire in July 2026, global refining volumes are likely to decline by more than 2 million barrels per day in 2026. Additionally, Iranian and Houthi attacks have reduced refinery utilization rates in Saudi Arabia and Kuwait since March 2026, and Russian refineries have been attacked by drones, turning Russia into a net importer of diesel. Although surging diesel prices may cause demand destruction of about 330,000 barrels per day, the supply reduction of more than 1 million barrels per day supports Asian crack spreads. Tight heavy crude supply pressures heavy distillate production, and Russia's LSFO export ban helps keep crack spreads elevated. Thai refinery stocks have risen significantly and may face profit-taking, but CGSI views any pullback as an accumulation opportunity, especially for TOP, SPRC, and BCP, as strong GRM in the first half of 2026 will generate cash flow and support attractive dividends. However, it maintains a Neutral rating on the Thai oil and gas group due to concerns over downstream petrochemicals.

The US Energy Information Administration (EIA) reported that US crude oil inventories increased by 95,000 barrels last week, while analysts had expected a rise of 1.6 million barrels. Crude stocks at Cushing, Oklahoma, the delivery point for US crude futures, rose by 1.2 million barrels. Gasoline inventories fell by 2.5 million barrels, more than the 700,000-barrel decline analysts had forecast. Distillate inventories, which include heating oil and diesel, decreased by 2.2 million barrels, versus an expected drop of 1.6 million barrels.

TotalEnergies CEO Patrick Pouyanne said the global oil market is bearish for crude but bullish for refined products, speaking at the ONS conference in Stavanger, Norway. Crude shipments continue to move through the Strait of Hormuz without issues, but higher shipping costs have stopped all refined product flows through the waterway, he said. Ukrainian drone strikes have reduced fuel supplies from Russia by 3 million to 3.5 million barrels per day. Pouyanne noted that shipping a very large crude carrier with capacity for 2 million barrels through Hormuz costs about $20 million, while for smaller vessels that transport refined products, this additional expense is too high, resulting in no product tankers moving through Hormuz. Benchmark crude oil trades near $90 per barrel in London, below levels seen at the start of the war, while the premium for products such as diesel compared to crude reached near its highest level in over 15 years.

The global diesel shortage is set to persist for months even if the Middle East war ends, as refining capacity outages and export bans tighten supply. Diesel prices in Europe have surged 70% from pre-war levels, and the U.S. diesel crack spread hit a record $102 per barrel on Monday. The International Energy Agency says about 9.6 million barrels daily of Middle East refining capacity, or a fifth of the total, has been knocked out by hostilities, while Russian export bans have removed the world's second-largest diesel exporter from the market. Bank of America analysts warn that U.S. fuel exports, which hit a record 1.9 million barrels daily, are drawing down already tight inventories and pushing diesel cracks toward record seasonal highs. Goldman Sachs notes global diesel stocks were already tight before the war, and FGE NexantECA's Eugene Lindell says Europe has a tremendous diesel problem that will get ugly with extremely high flat prices.

China increased fuel exports by 6.7% in July compared with June, even as annual exports fell 12.9%, according to Chinese customs data cited by Reuters. Refiners shipped 4.65 million tons of refined products including gasoline, diesel, jet fuel, and bunkering fuel, with diesel exports surging 88% to 810,000 tons amid a global diesel squeeze caused by the wars in the Middle East and Ukraine. Gasoline exports jumped 320% from June but remained 55.3% lower than a year earlier, while jet fuel exports rose 42% month-on-month but fell 33% annually, after Beijing relaxed fuel export curbs imposed in March following the closure of the Strait of Hormuz. The latest easing, announced earlier this month, allows 2.7 million tons of refined products to be exported through the end of August, with some volumes rollable to September, prompted by abundant domestic stocks that analysts say helped prevent a sharper oil price spike.

The Australian government has announced the establishment of a strategic fuel reserve of 1 billion litres, covering aviation fuel and diesel, to protect against the impact of future supply shortages. It will invest 3.2 billion Australian dollars, or 2.3 billion US dollars, in the Australian Strategic Fuel Reserve, which is government-owned and comprises a combined 1 billion litres of diesel and aviation fuel to hedge against risks from international supply disruptions and oil market volatility. The funding comes from a total budget of 14.8 billion Australian dollars, or 10.5 billion US dollars, allocated for strengthening energy security and crisis response in the federal government's 2026-27 budget, which Prime Minister Anthony Albanese announced in May. Amid a global crude oil price crisis driven higher by conflict in the Middle East that has pushed fuel prices in Australia to record highs, the relevant minister is also seeking public feedback on a plan to develop a domestic low-carbon liquid fuel industry to reduce reliance on imported fuel, and discussing options to support the country's two remaining oil refineries to continue operating beyond 2030.

Wholesale diesel prices have climbed to roughly $180 a barrel on world markets and could push above $200 a barrel if a tropical storm threatens Gulf Coast refining infrastructure, according to Tom Kloza, Chief Energy Advisor for Gulf Oil. Kloza warned that drone strikes knocked out refining capacity in Russia, Saudi Arabia, and Libya within a single week, tightening a global market already short by an estimated 7 to 9 million barrels a day of refining capacity. Fresh Energy Department data showed the United States exported nearly 2 million barrels of distillate last week, a record, while domestic consumption runs close to 3.5 million barrels a day and maximum domestic output is capped near 5.3 million barrels a day. Kloza also noted that government-linked fuel surcharges are indexed to EIA retail diesel prices, yet only about 2% of large fleets actually pay retail, meaning shippers tied to EIA-based formulas may be overpaying relative to what carriers actually spend at the pump.

The United States has suffered a strategic debacle in its war with Iran, allowing Iran to enhance its position in the Gulf region through a blockade of the Strait of Hormuz. While benchmark crude prices have settled around 90 dollars per barrel, the crack spread, which reflects the price difference between crude oil and petroleum products, has surged by about 40 dollars per barrel since late February. This means the real economic cost for consumers and businesses is rising even more than crude prices suggest. The widening spread reflects reduced refining capacity in the Gulf due to the Hormuz blockade, on top of diminished Russian refining capacity. Iran continues its attacks using cheap drones and missiles, while the U.S. is depleting its stockpile of expensive Patriot missiles. For Gulf states, U.S. military bases are now seen as a risk rather than a deterrent. As long as Iran remains in power, free navigation through the Strait of Hormuz will not return, and Iran is expected to impose transit fees, effectively raising the real benchmark price of crude oil.

The Fuel Fund Executive Committee has resolved to increase retail prices for all fuel types by 0.85 baht per litre, effective 12 August 2026, due to escalating tensions in the Middle East where negotiations between the United States and Iran appear to have reached an impasse, dashing hopes for the reopening of shipping lanes in the Strait of Hormuz, while global oil prices continue to climb. On 11 August, diesel prices in the Singapore market surged past 160 US dollars per barrel, and gasoline prices exceeded 116 US dollars per barrel. As a result, the Fuel Fund has been shouldering a compensation burden of approximately 343 million baht per day, necessitating a reduction in this burden to preserve liquidity for long-term price stabilisation. New retail prices in the Bangkok area, excluding local maintenance taxes, are as follows: benzene 95 at 45.83 baht per litre, gasohol 95 at 36.84 baht per litre, and diesel at 37.54 baht per litre.

The United States expects oil supply disruptions from the US-Iran war to reach approximately 600,000 barrels per day through the end of next year as the conflict continues to restrict shipments through the Strait of Hormuz. Oil transported through the waterway averaged 4.9 million barrels per day in the second quarter of this year, a sharp decline from an average of 21.6 million barrels per day in the last quarter of 2025 before the US and Israel launched attacks on Iran. The Energy Information Administration raised gasoline and diesel price forecasts for 2026 by 3.7% and 5.4% respectively and increased its 2027 forecast for retail gasoline prices by 6.5% from its estimates a month earlier. The agency estimates that Middle East production shut-ins eased to average about 5.5 million barrels a day in July, compared to 7.5 million barrels a day in June, but the volume of oil shut in is expected to increase again to 6.6 million barrels a day in the third quarter. The report assumes that recent threats to vessels carrying Saudi Arabian crude through the Bab el-Mandeb Strait have not resulted in additional production shut-ins, and if that holds, most production and trade flows are expected to return to pre-war levels by early 2027.

President Donald Trump has escalated demands for Iran to pay compensation for deaths and damage from conflicts across multiple countries, after Iran reiterated its own call for the United States to pay war reparations. The developments further reduce hopes that the two sides can quickly reach a deal to end the conflict and reopen the Strait of Hormuz. Trump said on social media that the United States will seek compensation from Iran for those killed and severely injured in roadside bombings and various conflicts, and will demand that Iran pay compensation to the families of protesters killed in Iran over the past several decades. He also expanded the scope to hold Iran accountable for damage in Lebanon, Syria, Yemen, and the Gaza Strip, without providing details on the form or amount of compensation. This latest stance comes after the Iranian government stressed that it wants to receive compensation for the war launched by the United States and Israel on February 28, hardening positions on both sides and reducing the chances of a short-term agreement on the Strait of Hormuz. This is despite earlier signals from Trump and US officials that negotiations were making progress, while Iran and Oman held parallel talks on shipping routes through the strait. The fading hopes are directly impacting energy markets, with Brent crude trading near 88 dollars per barrel after rising 5 percent on Monday, while West Texas Intermediate traded near 82 dollars per barrel. European diesel futures surged more than 10 percent after refineries in Saudi Arabia, Libya, and Russia came under attack, further tightening the oil products market. Esmaeil Baghaei, spokesperson for the Iranian Foreign Ministry, said the reopening of the Strait of Hormuz depends on the United States ending what Iran views as illegal actions, lifting the blockade, and paying compensation for damages. Trump, meanwhile, said the Strait of Hormuz is already open and under US control, adding that Washington still has the capability to escalate military operations if necessary.

The months-long closure of the Strait of Hormuz has triggered severe global jet fuel shortages, forcing airlines to cut flights and seek alternative supplies. Europe faces a jet fuel supply deficit of almost 600,000 barrels per day in the third quarter, according to consultancy Energy Aspects, compared with surpluses of around 116,000 barrels per day in the United States and 425,000 barrels per day in Asia-Pacific. Jet fuel prices spiked to a high of $215.32 a barrel in late March before easing to just over $130. Ryanair reported an 11% rise in operating costs after 20% of its unhedged fuel was hit by price spikes, while Southwest Airlines shipped 12.6 million gallons of fuel from Texas to California via the Panama Canal to ease West Coast shortages. United Airlines expects nearly $6 billion in additional fuel expense for full-year 2026 compared with its forecast at the start of the year.

Phillips 66 expects soaring refining margins will last through the next quarter and into 2027, as supply disruptions from the war in Iran continue to weigh on fuel markets. Executive VP Brian Mandell said on the company's earnings call that markets are short 7 million barrels per day of refined products from the Middle East and Asia, and another 1.4 million barrels per day from Russia, setting up stronger margins through the third quarter and perhaps the rest of next year. The company reported a four-fold increase in second-quarter earnings to $3.85 billion, or $9.55 per share, with its refining segment's adjusted earnings jumping to $3.09 billion and realized margins more than doubling to $24.08 per barrel. Refining utilization rates edged up to 96% in the second quarter, and the company plans to operate in the mid-90% range in the third quarter. Net debt fell nearly 25% quarter-over-quarter to $16.5 billion, putting Phillips 66 on track to reach its $17 billion debt target by the end of 2026, a year ahead of schedule.

The US Energy Information Administration, or EIA, reported that US crude oil inventories increased by 2.5 million barrels last week, contrary to analysts' expectations of a 1.5 million barrel decline. Crude stocks at the Cushing, Oklahoma delivery hub for US crude futures rose by 2.4 million barrels. Gasoline inventories fell by 1.6 million barrels, more than the 1.3 million barrel drop analysts had forecast. Meanwhile, distillate fuel inventories, which include heating oil and diesel, decreased by 3.5 million barrels, against expectations of a 206,000 barrel increase.

Stephen Schork, principal and editor at The Schork Group, says refiners have virtually no ability to increase capacity and deliver more gasoline and diesel products to lower costs for consumers. His comments come after President Donald Trump scolded ExxonMobil Holdings Corp. and Chevron Corp. Monday for making too much money as oil prices surged amid the war in Iran.

California diesel prices have jumped to $6.92 per gallon since the Iran war began, up from $5.10, with ripple effects across the U.S. economy. The state is home to the nation's busiest containership port complex, handling nearly one-third of imports and exports, meaning goods hauled by trucks and trains pay California fuel prices before reaching shelves nationwide. ExxonMobil CEO Darren Woods warned that the refining challenge will persist, citing lost Russian capacity and uncertainty over Chinese exports. According to Lipow Oil Associates, the world is short about 8% of global diesel demand due to the Iran war and attacks on Russian refining. JPMorgan analysts noted that a meaningful share of America's supply chain pays West Coast fuel prices, influencing freight costs and the delivered cost of goods across the country.

Exxon Mobil and Chevron warned that global supplies of diesel and other refined products will likely remain tight, leading to persistently high fuel prices in the coming months. Both companies reported large jumps in second-quarter refining profits, with Exxon's refining unit collecting $5.5 billion in earnings, up from $1.4 billion a year earlier. Nearly 10% of the world's refining capacity is effectively offline due to the Strait of Hormuz closure, Ukrainian attacks on Russian refineries, and China's export ban, according to Melius Research. Exxon CEO Darren Woods said available capacity relative to demand is the lowest he has ever seen, while Chevron CEO Mike Wirth expects upward pressure on product pricing into the third quarter and beyond. Refined product inventories are approaching historical lows, causing gasoline prices to disconnect from oil prices and trade on storage levels instead.

ExxonMobil CEO Darren Woods warned that constrained global refining capacity has broken the traditional link between crude oil and fuel prices, meaning motorists should not expect rapid relief at the pump even when crude declines. U.S. refineries operated at an elevated 96.1% of capacity in mid-July, yet gasoline inventories remained 7% below their five-year average and distillate inventories were 10% lower. The Energy Information Administration expects tight inventories to prevent wholesale gasoline prices from falling as quickly as crude during the third quarter. Exxon's second-quarter adjusted Energy Products earnings rose to $4.10 billion from $2.80 billion sequentially, supported by strong Gulf Coast refinery utilization and record diesel production, while companywide adjusted earnings reached $14.68 billion and free cash flow climbed to $17.24 billion. Woods also cited Middle East tensions as the largest near-term risk, emphasizing that the Strait of Hormuz must remain open as the main artery of global supply.

In a blog post dated the 31st, the European Central Bank pointed out that oil refining margins widening to near record levels are one factor behind rising fuel prices in the euro area. The refining margin embedded in diesel retail prices rose from 0.10 euros per litre before the Iran conflict to 0.35 euros in the first three weeks of July, while for petrol it widened from 0.04 euros in February to 0.23 euros in July. Global fuel supply is tight due to disruptions at Middle Eastern refineries and reduced Russian refining volumes, and Russia has extended its ban on diesel and petrol exports until 31 January 2027. The blog said margins are likely to rise further in August, but based on futures prices on the 20th of this month, it projected a decline to 0.16 euros by the end of 2027. The content of the blog does not necessarily represent the official views of the ECB.

The National Development and Reform Commission of China has announced an increase in the retail prices of gasoline and diesel, effective tomorrow. The price of gasoline will rise by 685 yuan per tonne, and the price of diesel will rise by 655 yuan per tonne. This price adjustment follows the mechanism under which China adjusts fuel prices every 10 working days in response to changes in global crude oil prices.

The Department of Energy’s average weekly retail diesel price rose 17.9 cents to $5.313 per gallon, its third straight weekly increase, even as crude oil futures plunged. On Monday, Brent crude settled at $88.36 a barrel, down $8.42 or 8.7%, while ultra-low sulfur diesel on the CME fell only 1.65% to $4.1116 a gallon. The divergence pushed the spread between ULSD and Brent to more than $2 a gallon, a level with no recent precedent. Analysts attribute the diesel market’s tightness to Ukrainian drone attacks cutting Russian refinery runs to a 20-year low, a Russian diesel export ban, and falling Rhine River water levels that threaten European fuel shipments.

U.S. airlines are slashing earnings forecasts after renewed Middle East hostilities pushed jet fuel costs sharply higher. Southwest Airlines reported a $900 million year-over-year jump in second-quarter fuel expenses, a $1.17 headwind to adjusted earnings per share, and cut its full-year 2026 adjusted EPS guidance to a range of $3.25 to $4.25 from at least $4.00. American Airlines saw fuel expense surge over $2.2 billion, or 83%, and now expects full-year adjusted diluted EPS between a loss of $0.65 and earnings of $0.65, with a third-quarter loss of $0.10 to $0.70 per share. United Airlines anticipates nearly $6 billion in added fuel expense for full-year 2026 and reported a $2.3 billion, or 84%, jump in second-quarter fuel costs. The spike follows the collapse of a U.S.-Iran memorandum of understanding and a ceasefire, which reignited crude and fuel price rallies, while record U.S. fuel exports and tight global markets add further pressure.

American Airlines Group shares tumbled after the carrier warned that surging jet fuel prices are eroding profitability, overshadowing a stronger-than-expected second-quarter earnings report. The airline reported record quarterly revenue of $16.7 billion, up 16.3% year-over-year, and adjusted earnings of $0.15 per share, beating Wall Street estimates, but net income fell sharply to $71 million from $599 million a year earlier as fuel expenses jumped more than $2.2 billion, or 83% year-over-year. Management now expects full-year adjusted earnings ranging from a loss of $0.65 per share to a profit of $0.65, a significant reduction from its prior outlook, and third-quarter adjusted EPS between a loss of $0.70 and $0.10. The stock fell 8.4% on July 23, extending its year-to-date decline to 5.6%, though it remains up 26.3% over the past 52 weeks. Analysts have a consensus Moderate Buy rating on the stock, with an average price target of $19.77, but Citigroup lowered its target to $19 from $22 and Melius Research downgraded the shares to Hold from Buy.

Kasikorn Securities maintains a Hold recommendation on Star Petroleum Refining Public Company Limited, or SPRC, with a target price of 9.70 baht based on a price-to-book value valuation of 0.88 times. The research house views the latest share price of 9.85 baht as already reflecting much of the fundamental value, resulting in a downside of 1.52 percent from the target price. The research team expects net profit for the second quarter of 2026 to come in at 6.64 billion baht, down 9.8 percent from the previous quarter, due to the recognition of inventory losses and inventory valuation adjustments totaling 372 million baht. Excluding these items, core profit would surge 333 percent from the prior quarter to approximately 7.0 billion baht, driven by a recovery in the refinery business. Key support comes from a higher refinery utilization rate, which is expected to rise to 86 percent from 63 percent in the first quarter. Meanwhile, the market gross refining margin is projected to increase to 19.9 US dollars per barrel from 12.8 US dollars per barrel, following the widening of petroleum product spreads. The gasoline spread rose to 28.9 US dollars per barrel from 9.6 US dollars per barrel, and the diesel spread increased to 62.9 US dollars per barrel from 36.3 US dollars per barrel, after supply disruptions in the Middle East and export restrictions on petroleum products by several countries. For the third quarter of 2026, Kasikorn Securities assesses that the profit trend remains strong, with petroleum product spreads staying elevated. The latest gasoline spread stands at 30.9 US dollars per barrel and diesel at 57.4 US dollars per barrel, with these two products accounting for approximately 65 percent of SPRC's total output. Moreover, the absence of planned maintenance shutdowns will help keep utilization rates high and continue to support earnings.

Iran-backed Houthi forces in Yemen have attacked commercial ships in the Red Sea, forcing several to reroute through the Bab el-Mandeb strait and heightening risks to global supply chains. The BBC reported on 24 July 2026 that the Houthis claimed to have struck multiple vessels and threatened ships heading to Saudi Arabian ports, causing cargo ships to divert or turn back. The incident unfolds amid the protracted conflict between the United States and Iran, with US Central Command striking coastal positions in Iran for a twelfth consecutive night, while Iran retaliates through attacks on US bases and support for allied groups. The Bab el-Mandeb strait is a vital shipping lane connecting trade between Europe, Asia, and the Middle East, and earlier blockages of the Strait of Hormuz have already disrupted oil and gas exports from the Persian Gulf. Saudi Arabia has therefore turned to the East-West Pipeline to the Red Sea port of Yanbu, but as the Houthis begin threatening ships passing Yemen's coast, that route now faces similar risks. Analysts worry that if both straits become unusable under normal conditions, it will further strain global supply chains, especially for key commodities, potentially driving up shipping costs and prices worldwide.

U.S. refinery utilization reached 96.2% as of July 17, up from 94.7% a year earlier, according to the Energy Information Administration. The Midwest and Rocky Mountains regions hit 100% capacity, while commercial oil stocks remain 6% below the five-year average and Strategic Petroleum Reserve levels are at four-decade lows. U.S. wholesale diesel futures surged 26% in July, and global refining margins for gasoline and diesel hit record highs amid Middle East tensions, Russia's diesel export ban, and falling inventories. Asian refiners face potential crude delivery delays that could disrupt plans to increase processing rates.

According to data from the US Energy Information Administration, US jet fuel demand reached a record high of about 2.15 million barrels per day in the week ending July 17. The surge was likely driven by fans flocking to airports in New York and New Jersey to watch the World Cup final between Spain and Argentina. The previous record was 2.11 million barrels in December 2017. UBS analyst Giovanni Staunovo noted that the World Cup likely provided a significant boost to demand. On the day of the final, more than 2.9 million passengers passed through airport security checkpoints, according to the Transportation Security Administration.

The Fuel Oil Fund Executive Committee has resolved to raise retail prices for all fuel types by 0.90 baht per litre, effective from 23 July 2026, even as it increases subsidies to cushion the impact of surging global oil prices driven by the Middle East crisis, failed negotiations, Iran's confirmation of the closure of the Strait of Hormuz, and Houthi threats to attack vessels in the Red Sea. This pushed Singapore diesel prices to 163.59 US dollars per barrel and gasoline to 124.92 US dollars per barrel on 22 July 2026. The Fuel Fund is shouldering a compensation burden of approximately 651.31 million baht per day, necessitating a revision of the fund's levy rates. New retail prices include regular high-speed diesel at 36.69 baht per litre, gasoline at 45.68 baht per litre, and gasohol 95 at 36.69 baht per litre. The committee urges the public to use energy efficiently to help reduce the national burden and strengthen the Fuel Fund.