Oil Prices Edge Lower but Remain Elevated Amid Global Supply Fears

Front-month crude oil prices were slightly lower in early trading Friday but held near multi-month highs, with global supply fears stemming from the Middle East conflict providing a firm floor under the market. West Texas Intermediate (WTI) crude was trading at $90.82 per barrel, down 0.53%, while the global benchmark Brent crude was at $95.14, down 0.4%, according to live price data. Bakken crude at the Clearbrook, Minnesota, hub was priced at a $3.42 per barrel discount to WTI.

The modest pullback follows a sharp weekly gain, with prices driven by escalating conflict between Iran and the United States. According to OilPrice.com, Brent neared $96 per barrel as Iran and the U.S. traded missile strikes this week and Israel’s defense minister threatened to cripple Iranian infrastructure, including energy facilities. Analysts at ING noted the rally may lose traction if shipments keep moving smoothly through the critical Strait of Hormuz, a chokepoint for global oil flows.

While crude prices dipped, U.S. diesel prices hit a record high, underscoring severe tightness in global fuel markets. The national average price for diesel reached a record $5.820 per gallon on Thursday, surpassing the previous high from June 2022, according to GasBuddy data cited by OilPrice.com. The squeeze is driven by crippled fuel supply from the Middle East and Russia, rising seasonal demand from the agricultural harvest, and a Russian ban on diesel exports.

This refining margin strength is a key factor for Bakken producers. High diesel and distillate prices improve crack spreads, supporting demand for the light, sweet crude oil typical of the Bakken formation. Furthermore, robust demand from Asia is absorbing available barrels. Refiners in India and China, the world's top oil importers, are stepping up spot purchases of Middle Eastern crude, according to Rigzone, which supports global price benchmarks.

For Bakken operators, the current environment presents a mix of high commodity prices and operational cost pressures. WTI above $90 per barrel supports strong cash flows and drilling economics. However, record diesel prices directly increase costs for drilling, completion, and transportation activities. The Bakken differential of -$3.42 reflects regional pipeline and rail logistics to move oil to coastal refineries or export hubs.

Market analysts are watching inventory levels closely. "The market is entering a delicate adaptation phase. Elevated inventories helped absorb the initial supply crisis, but the challenge is now to keep the market balanced as those buffers diminish," ANZ analysts said in a note reported by OilPrice.com. U.S. Vice President JD Vance added to geopolitical uncertainty, stating Washington does not plan to hold peace talks with Iran until it stops attacking ships in the Strait of Hormuz.