US heating oil futures climbed above $4.30 per gallon in late July, reaching their highest level in nearly four months, as renewed hostilities between Iran and the United States prolonged supply disruptions from the region. Iran launched attacks on US forces across the Middle East as well as on Saudi oil and refining infrastructure, prompting retaliatory strikes by the US and Saudi Arabia on Iranian forces in Iraq. The renewed conflict reinforced expectations that Iran and Houthi rebels will continue to target tankers transiting the Red Sea and the Persian Gulf in the near term, curbing supplies from major producers.
At the same time, Russian diesel exports were constrained after recent Ukrainian strikes on refineries led Moscow to suspend exports for the entire month of July. Nevertheless, US distillate fuel inventories rose more than expected for a third consecutive week as of July 24th, supported by a rebound in refinery runs. Even so, wholesale fuel prices remained elevated, as a sharp drawdown in commercial inventories and the Strategic Petroleum Reserve underscored an overall backdrop of tight supply.
