EIA: crude oil and petroleum product prices increased sharply in 1Q26

Crude oil prices

After beginning the year at US$61/bbl, the front-month futures price of Brent crude oil finished the quarter at US$118/bbl. The price increase during the quarter was the largest on an inflation-adjusted basis in data going back to 1988.

In January and February, Brent prices steadily increased from US$61/bbl to US$72/bbl in response to increasing risk of a conflict in the Middle East. Following military action in the region, prices increased more sharply after most shipping traffic stopped traversing the Strait of Hormuz because of the risk of physical damage from Iranian attacks to vessels transiting the strait. In response to disrupted navigation through the strait, many countries in the Middle East – including Iraq, Saudi Arabia, and the UAE – shut in oil production. Attacks on energy infrastructure and the threat of additional attacks also supported increasing crude oil prices. The price of Brent crude oil surpassed US$100/bbl on March 12 and continued to generally increase throughout the month.

As crude oil prices increased in March, the spread between Brent and West Texas Intermediate (WTI) crude oil futures contracts for May delivery widened. The Brent price increased more sharply than the WTI price due to exposure to higher shipping costs and reduced oil flows between regions near the Strait of Hormuz, while strong US inventories and plans to release crude oil from the Strategic Petroleum Reserve helped limit WTI price increases. After beginning the quarter around US$4/bbl, the Brent-WTI spread increased in March, peaking at US$25/bbl on March 31 and averaging US$11/bbl in the month, the highest in over five years.

Petroleum product prices

Gasoline, distillate, and jet fuel spot prices increased rapidly in the first quarter after supply disruptions to Middle East exports of crude oil and petroleum products. Higher crude oil prices caused petroleum product prices to increase because crude oil is typically the largest input cost for producing petroleum products. On 30 March, the US average retail gasoline price of US$3.99/gal. and US average diesel price of $5.40/gal. were the highest in real terms in over two years.

Although gasoline prices have increased substantially, jet fuel and distillate prices have increased significantly more. On the supply side, disruptions to Middle East exports of distillate and jet fuel have affected the market for these fuels far more than for gasoline. Strong distillate demand since the start of the quarter has also increased market tightness and amplified price increases. Key factors causing higher distillate demand or market tightness include:

• Increased U.S. exports to Europe because of sanctions on Russia.
• Extremely cold weather in the Northeast that increased space heating needs.
• Stronger than usual trucking demand in February.
• Less renewable diesel supplementing distillate supplies than in previous years.

Higher distillate prices tend to pull jet fuel prices higher, and vice versa, because both come from similar distillation fractions in the refining process. That means refiners can shift some production from one product to the other when it’s profitable. Although there are technical limits to how much refiners can shift production yields between jet fuel and distillate, shifting production yields can keep the prices of both products relatively close.

Refinery inputs

US refinery inputs in the 1Q26 exceeded the five-year (2021 - 25) range, averaging close to 2018 - 20 levels, based on the EIA's Weekly Petroleum Status Report estimates. It estimates that refinery utilisation similarly exceeded the five-year range during 1Q26. High distillate prices led to higher refinery inputs by raising refinery margins for distillate. Distillate crack spreads – a measure of the refinery margins for distillate – at New York Harbor averaged $1.42/gal. in March, its highest monthly level since 2022 and well above the 2021 - 25 five-year average of US$0.68 /gal. A relatively heavy turnaround season in the autumn of 2025 helped reduce the need for scheduled maintenance in 1Q26.

Read the article online at: https://www.hydrocarbonengineering.com/refining/09042026/eia-crude-oil-and-petroleum-product-prices-increased-sharply-in-1q26/