Diesel Cracks Hit Record Above $98 as Houthi Drone Strike Hits Aramco Jazan Refinery and Hormuz Workarounds Emerge

Diesel crack spreads surged above $98 a barrel to a record high after a Houthi-claimed drone attack sparked a fire at Saudi Aramco's 400,000-barrel-per-day Jazan refinery in southwestern Saudi Arabia, tightening an already strained refined-products market. The Saudi Energy Ministry confirmed the blaze was extinguished without casualties, but the incident intensified supply concerns. Global refinery runs are already running roughly 5 million barrels per day below typical mid-summer levels, stuck near 80 million barrels per day, with the shortfall concentrated in Russia, the Middle East, and China.

The IEA estimates a global oil supply deficit of 1.8 million barrels per day for the current quarter and has warned that higher prices are beginning to erode demand. Deadlocked U.S.-Iran talks have kept the Strait of Hormuz risk elevated, though analysts including Javier Blas note the strait has not been formally closed. Iraq has confirmed it is selling crude to Abu Dhabi's ADNOC inside the Persian Gulf, with ADNOC then moving the barrels out through Hormuz using dark tanker shuttle runs, a workaround ADNOC has pioneered to keep flows moving despite the geopolitical overhang.

BofA noted that diesel crack spreads are now near a level where the differential alone exceeds the price of WTI crude, underscoring how severely the refinery disruptions and demand for distillates have outpaced crude market moves.