The Hormuz Crisis Continues. How High Could Oil Prices Go From Here?
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Key Points:
- Diesel printed its all-time high on 3 Sept with US refiners at 98% utilisation and the 172mb SPR release spent. Diesel is only 0.09% of US CPI directly, but refining ranks first of all industries on inflation impact (PERI) - the shock reaches core through freight, farms, utilities and food, not the pump.
- Washington has taken Venezuela's barrels off China's table. NABEP gets 100-year rights over 17 fields and about 65bn bbl of reserves; Venezuelan crude exports to China have gone from roughly 600kb/d to zero, stranding $10-12bn of Chinese oil-backed loans that were being repaid in crude.
- China's replacement barrel is Russian, and it's paying up for it. Nov-loading ESPO out of Kozmino is trading at +$7 to +$10 over Brent, from about +$2 in early August - the same October cargo was priced at +$1 and then +$5 two weeks apart. Russia is now 25% of China's seaborne crude, double a year ago.
What I have been covering over the last 2 months-the refinery and diesel story-has now reached port. Welcome to the third order consequences of this oil market disruption. Global refinery is so constrained, that even with US refiners pushing utilisation to 98% in the last 2 weeks, prices on both sides of the Atlantic reached their highest levels in history last Wednesday. If you have not been following my coverage on this, please have a read of ‘Be Prepared’ August 4th 2026 or the recent ‘Crackageddon’ September 1st.