Crude Flows Recover, but Diesel Remains Scarce

Key Takeaways:

*Oil’s main pressure point is diesel. Crude exports have recovered, but refined fuels remain scarce.

*China’s export pause tightened the fuel outlook. It is unclear whether shipments will resume after the 7 October holiday.

*Gulf shipping risk supports prices. More crude is moving through alternative routes, while tanker attacks and U.S.–Iran tensions keep traders cautious.

Market Summary:

Oil fundamentals are being pulled in two directions as of Friday morning, 2 October. Crude supply has improved, but the supply of usable fuels remains tight. December Brent settled Thursday at $102.31 a barrel, up 4.37%, while WTI rose 2.71% to $92.87. Brent was around $102.53 in early Friday trade. The sharp rebound followed reports of curtailed Chinese fuel exports and a larger U.S. military presence in the Middle East; Friday’s smaller move suggests traders are reassessing those risks after Thursday’s surge. live.euronext.com

The strongest support for prices is the refined-product shortage, particularly diesel. Chinese refiners have suspended October exports beyond Hong Kong and Macau while awaiting approval, and PetroChina has cancelled some gasoline and jet-fuel cargoes. Kpler estimates China’s commercial diesel and gasoil stocks are about 20 million barrels below the level Beijing wants restored. It remains unclear whether exports will resume after the holiday ends on 7 October. Russia’s diesel export restrictions and damage to Gulf and Russian refining infrastructure add to the squeeze. In the U.S., the latest EIA figures show distillate stocks falling 2.3 million barrels to 105.2 million, even as commercial crude stocks rose 0.9 million to 427.3 million. That split is why more crude on hand has not brought equivalent relief to fuel markets. live

There is nevertheless a meaningful counterweight to higher crude prices. Kpler estimates 16.5 million barrels a day of non-Iranian Gulf crude left the region in September, matching its pre-war average, while Saudi Arabia has resumed loadings from Yanbu. The recovery relies heavily on pipelines and ship-to-ship transfers: about 40% of that crude now bypasses Hormuz, compared with 17% before the war. Those workarounds keep barrels moving, but tanker attacks and reports of a third U.S. aircraft carrier and up to 10,000 additional personnel have preserved a geopolitical risk premium. The reported deployment is a risk to future supply, not evidence that those barrels have already been lost. www.kpler.com

Policy decisions could determine the next move. The EU is discussing a diesel-stock release after U.S. pressure; Reuters reports a request for 120 million barrels over six months and a possible U.S. diesel export restriction, but no such release or restriction has been announced. OPEC+ is scheduled to meet on 4 October; expectations that it will keep November targets steady remain a report, not a decision. My near-term reading is that tight diesel supply and shipping risk support Brent, while recovering Gulf crude flows, a European reserve release, or progress in U.S.–Iran talks could pull some of Thursday’s gains back.

Technical Analysis

CL-Oil, H4:

Crude oil is showing signs of recovery after rebounding from the 88.95 support zone, with the price now holding above the 92.30 level and consolidating near 92.60. The recent rebound has pushed price back above 92.30, although the broader structure remains range-bound following the earlier decline from the 95.95 area. 

Momentum indicators are improving, with RSI rising to around 53 and moving back above the 50 level, while MACD has turned higher with the histogram returning to positive territory, suggesting that short-term buying momentum is strengthening. From here, a sustained break above 95.95 could open the way toward the 99.10 resistance, while failure to hold 92.30 may expose the 88.95 support; a break below this level would weaken the recovery structure and bring 86.35 into focus.

Resistance Levels: 92.30, 95.95

Support Levels 88.95, 86.35