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Oil and LNG traders brace for an extended Middle East squeeze
Crude flows through the Strait of Hormuz have fallen to about 11% of pre-war levels, with diesel shortages worsening into autumn and winter.
For much of the past six months, traders in commodity futures took cues on the Middle East conflict as if a rapid resolution were likely, betting on an early end to disruption. OilPrice says that optimism is fading as the physical supply squeeze catches up with the market.
The Wall Street Journal reported a diesel shortage that has been building since spring is becoming more severe, and is expected to worsen as demand rises in autumn and winter. The article also points to shortages across other refined fuels, noting that both the Middle East and Russia were major refined fuel exporters before the war changed trade flows.
In crude markets, OilPrice cites Reuters reporting that traders are increasingly pricing an extended Middle East crisis. It says oil flows via the Strait of Hormuz averaged about 2.0 million barrels per day, down from 4.8 million barrels daily in July and far below pre-war levels near 18 million barrels daily, cutting tanker traffic to roughly 11% of what it used to be.
OilPrice adds that, while the squeeze is not equally pronounced across all fuels, it is present, and crude supply is tightening as the effective influence of high-level diplomacy appears to be wearing off for traders.
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