Octane bolsters gasoline but should ease post-summer
07 Aug 2026 11:29:45 ET
CITI’S TAKE
Brent eased toward the $80/bbl-mark as markets increasingly focus on a diplomatic resolution to the latest US-Iran tensions. Although there remains uncertainty around the proposed Hormuz framework, the price action suggests that disruption fears are easing faster than physical supply concerns are escalating. Refined product markets, however, still reflect notable tightness, with octane values remaining elevated. Easing seasonal requirements, operational bottlenecks, and recovering refinery runs should gradually improve octane balances into 4Q’26. Stocks across high-frequency hubs tightened further last week. Improving product availability and the normalization of trade flows should help ease these pressures into year-end.
The latest Iran-Oman draft includes a 60-day period during which inbound traffic would use the Iranian northern route while outbound traffic would use the Omani southern route (AP 8/5/26, CBS 8/5/26). Iran has said that the framework would be a jointly managed transit regime, including service fees with revenues shared between Iran and Oman (AP 8/4/26, Reuters 8/2/26, Al Jazeera 8/2/26). Yet, the US disputes key elements of the reported arrangement, maintaining that any reopening must preserve unrestricted freedom of navigation without Iranian approvals, tolls, or controls (AP 8/4/26, CNBC 8/5/26). Risks remain elevated outside Hormuz too, with Houthi groups in Yemen continuing attacks and threats against Saudi-linked shipping in the Red Sea and around Bab el Mandeb (Al Jazeera 8/7/26). Thus, oil markets have been choppy, but have eased again on the prospect of a diplomatic solution rather than a prolonged supply disruption, with Brent easing toward the $80/bbl-mark. Our base case has been that the US-Iran crisis, and the disruption to flows through the Strait of Hormuz, should ease as dealmaking eventually prevails, though prolonged back-and-forth in this process leads us to mark-to-market for 3Q’26 to $80/bbl Brent average, with 4Q’26 remaining at $70 and 2027 at $65 Brent average. For a detailed discussion of our geopolitical base case and its implications for oil markets, please refer to Oil Monitor 7/21/2026.
Global octane tightness has amplified the effects of exceptionally low refinery throughput, underpinning gasoline strength throughout the year. The issue has not been just a shortage of gasoline, but rather a shortage of the high-octane blendstocks needed to produce fuel that meets seasonal specifications. Refiners have strived to produce gasoline, yet producing sufficient quantities of on-spec product has become increasingly challenging. Consequently, the scarcity of critical blending components has emerged as an independent source of support for gasoline cracks, extending beyond the constraints imposed by refinery capacity and crude availability. We delve deeper into the drivers of this in this report.
Προσθήκη του MarketsReport.gr στην Google