Spot Mideast crude prices strengthen after Iran attacks UAE tankers

• Prompt monthly Dubai crude spreads flipped into backwardation of nearly $1 per barrel after three weeks in contango, signaling tight supplies as shippers avoid the Gulf region
• ADNOC has committed to over 70 million barrels of crude sales between June and August and may need to tap Fujairah inventories to meet demand amid potential shuttle service delays
• Asian refiners are switching to arbitrage supplies from West Africa and Latin America, with Indian buyers increasing Russian oil purchases as supply could tighten by September if disruptions last 10-15 days

Market Summary: Middle East Crude Price Surge Following Iran-UAE Tanker Attacks

Key Developments:

Prompt Middle East crude prices strengthened significantly after Iran attacked two UAE tankers operated by Abu Dhabi National Oil Company (ADNOC) near the Strait of Hormuz. The attacks are part of escalating U.S.-Iran tensions following a five-month conflict period.

Market Impact:

• Dubai crude monthly spreads flipped into backwardation of nearly $1/barrel on Tuesday, reversing three weeks of contango—signaling tight supplies
• Asian naphtha crack surged to $184/metric ton over Brent, highest since May 19
• Diesel and jet fuel margins jumped to near two-month highs
• High-sulfur fuel oil margins reached four-week highs

Supply Concerns:

Only five vessels transited the Strait of Hormuz on Monday, with no oil or LNG tankers entering. The attacks have deterred shippers from entering the Gulf, raising concerns about delivery reliability for Asian refiners in coming weeks. Yemen's Houthi movement launched attacks on Saudi Arabia, further escalating regional tensions.

Industry Response:

• ADNOC, which committed to sales exceeding 70 million barrels between June-August, is expected to utilize Fujairah inventories to meet demand
• Asian refiners are seeking alternative supplies from West Africa and Latin America
• Indian buyers plan to increase Russian oil purchases
• Current inventories are sufficient, but supplies could tighten by September if disruptions last 10-15 days

Geopolitical Dimension:

The U.S. announced naval blockade reinstatement on Iran and proposed collecting 20% fees on Strait of Hormuz cargo shipments, though the UN shipping agency opposes such fees.

Market Outlook:

Analysts warn of rising war premiums and potential disruptions through the Bab el-Mandeb Strait, with the previous "mini-glut" of oil now evaporated.